We recently started a series called “Penny Stock of the Day”. These ideas are geared towards traders with an extremely high risk appetite.
Our Penny Stock of the Day is chosen by screening for stocks under $5 and then applying technical analysis on the shortlisted set of penny stocks showing unusual volume. When making these trades, please make sure to pay vigilant attention to pricing moves and have a strict stop loss in place to avoid significant losses.
Penny Stock of the Day: Blue Apron Holdings Inc. (NYSE: APRN)
Today’s penny stock pick is the American ingredient-and-recipe meal kit company, Blue Apron Holdings Inc. (NYSE: APRN).
Blue Apron Holdings Inc. operates a direct-to-consumer platform that delivers original recipes with fresh and seasonal ingredients. It also operates Blue Apron Market, an e-commerce market that provides cooking tools, utensils, pantry items, and other products. In addition, the company offers Blue Apron Wine, a direct-to-consumer wine delivery service that sells wines, which can be paired with its meals. It serves young couples, families, singles, and empty nesters. The company offers its services through order selections on Website or mobile application primarily in the United States.
Website: www.blueapron.com
Latest 10-k report: https://sec.report/Document/0001558370-22-002191
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for APRN in the last 3 months, the stock has an average price target of $12.00, which is nearly 181% upside from current levels.
Source: TipRanks.com
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company received $75 million in capitalization events. The company plans to use the proceeds to pay off its existing term loan, and for general corporate purposes to stay focused on its long-term sustainable growth plan and to continue to execute on its turnaround strategies.
- The company announced purchase agreement of shares at $12, to be completed in two tranches: $20M for 1,666,666 (4/29) and $20M for 1,666,667 (5/30). in return, the company has agreed to modify the registration agreement with RJB Partners.
- Hedge Funds Increased Holdings by 604.5K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Corporate Insiders Bought Shares Worth $45.0M in the Last 3 Months.
Insiders | Source: TipRanks.com
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Falling Wedge Pattern Breakout: The daily chart shows that the stock has been forming a falling wedge pattern for the past several months. These are marked as purple color lines. It has typically taken support at the bottom of the wedge before bouncing back. The stock has currently broken out from the falling wedge pattern. Once the stock breaks out of the falling wedge pattern, it could move higher.
APRN – Daily Chart
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line is above the -DI line, and the ADX line is currently moving higher from below the +DI and -DI lines.
#3 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.
#4 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#5 Consolidation area: The weekly chart shows that the stock was consolidating within a price range for the past few days. This area is marked as a pink color rectangle. The stock is currently moving higher after taking support at the bottom of the consolidation area. Once the stock breaks out from this consolidation area, it could surge higher.
APRN – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.
#7 Bullish RSI: The RSI is currently moving higher from oversold levels, indicating bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for APRN is above the price of $4.75.
Target Prices: Our first target is $6.50. If it closes above that level, the second target price is $8.00.
Stop Loss: To limit risk, place a stop loss at $3.80. Note that the stop loss is on a closing basis.
Our target potential upside is 34% to 50%.
For a risk of $0.95, our first target reward is $1.75, and the second target reward is $3.25. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 3x more potential upside than downside.
Potential Risks / Red Flags:
- The company has a history of net losses. In the years ended December 31, 2021, 2020, and 2019, APRN incurred net losses of $88.4 million, $46.2 million, and $61.1 million, respectively.
APRN – Consolidated Statements of Operations
- Despite being a loss-making company, the executives are being paid significant compensation.
APRN – Executive Compensation
- The Company was subject to a consolidated putative class action lawsuit in the U.S. District Court for the Eastern District of New York alleging federal securities law violations in connection with the Company’s IPO. The amended complaint alleged that the Company and certain current and former officers and directors made material misstatements or omissions in the Company’s registration statement and prospectus that caused the stock price to drop. On December 2, 2020, the Company had to settle this lawsuit.
- The Company is subject to a lawsuit filed in California Superior Court under the Private Attorneys General Act on behalf of certain non-exempt employees in the Company’s Richmond, California fulfillment center. The complaint, filed on October 16, 2017, alleges that the Company failed to pay wages and overtime, provide required meal and rest breaks, provide suitable resting facilities and provide accurate wage statements, to non-exempt employees in violation of California law.
As you can see, today’s featured penny stock offers big upside potential… but it also comes with a number of risks and red flags. As always, when dealing with penny stocks, we advise caution before entering into such high-risk ventures. Remember to think before you trade… understand the risks… and if you decide to trade, stick to your stop-losses!
Happy Trading!
— Trades of the Day Research Team
READ BEFORE TRADING PENNY STOCKS: The allure of penny stocks lies in their potential to deliver massive gains in a short period of time. However, in exchange for that opportunity, most penny stocks carry tremendous risk. They can be extremely volatile and are susceptible to “pump and dump” schemes and fraud.
Unlike regular stocks, the financial condition of most penny stock companies can be extremely difficult to analyze, as the majority of such stocks are traded on over-the-counter (OTC) exchanges, which are typically less transparent and less regulated than the major exchanges. In fact, in the penny stock space, it’s often easier to spot warning signs and red flags than it is to identify a sound investment. Nevertheless, we do our best to identify short-term trade opportunities in this exciting space because we know some of our readers are looking for high-risk, high-reward ideas. We just urge you to make sure you fully understand the risks before making any of these trades.
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