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: Wheels Up Experience Inc. (NYSE: UP)
Today’s penny stock pick is the private aviation services company, Wheels Up Experience Inc. (NYSE: UP).
Wheels Up Experience Inc. is a provider of “on demand” private aviation in the United States and one of the largest private aviation companies in the world. The company offers a suite of products and services, which include multi-tiered membership programs, on-demand flights across various private aircraft cabin categories, aircraft management, retail and wholesale charter, whole aircraft acquisitions and sales, corporate flight solutions, special missions, signature events and experiences, and commercial travel. It operates a fleet of approximately 1,500 aircraft.
Website: https://wheelsup.com
Latest 10-k report: https://sec.report/Document/0001819516-22-000009
Analyst Consensus: As per TipRanks Analytics, based on 7 Wall Street analysts offering 12-month price targets for UP in the last 3 months, the stock has an average price target of $5.40, which is nearly 131% upside from current levels.
Source: TipRanks.com
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Corporate Insiders Bought Shares Worth $1.3M in the Last 3 Months.
Insiders | Source: TipRanks.com
- Hedge Funds Increased Holdings by 52.0K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Goldman Sachs analyst Noah Poponak initiated coverage on Wheels Up Experience with a “Buy” rating. And Poponak assigned the company a price target of $5, which imputes an upside of over 160%.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Falling Wedge Pattern: 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 currently looks poised for a breakout from the falling wedge pattern. Once the stock breaks out of the falling wedge pattern, it could move higher.
UP – Daily Chart
#2 Bullish RSI: The RSI is nearing 50 and moving higher, indicating possible bullishness.
#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 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as an orange color dotted line. This is a possible bullish indication.
UP – Weekly Chart
#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#6 MACD above Signal Line: In the weekly chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for UP is above the price of $2.80.
Target Prices: Our first target is $3.40. If it closes above that level, the second target price is $4.10.
Stop Loss: To limit risk, place a stop loss at $2.45. Note that the stop loss is on a closing basis.
Our target potential upside is 21% to 46%.
For a risk of $0.35, our first target reward is $0.60, and the second target reward is $1.30. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 4x more potential upside than downside.
Potential Risks / Red Flags:
- The company has a history of net losses. UP incurred net losses of $197.2 million and $85.4 million for the years ended December 31, 2021, and December 31, 2020, respectively.
UP – Consolidated Statement of Operations
- The company has significant long-term lease obligations primarily relating to its aircraft fleet. On December 31, 2021, UP had 100 aircraft under operating leases, with an average remaining lease term of approximately 3.4 years. As of December 31, 2021, future minimum lease payments due under all long-term operating leases were approximately $156.6 million.
- Despite being a loss-making company, the executives are being paid significant compensation.
UP – Executive Compensation
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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