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: Ceragon Networks Ltd (NASDAQ: CRNT)
Today’s penny stock pick is the wireless backhaul solutions company, Ceragon Networks Ltd (NASDAQ: CRNT).
Ceragon Networks Ltd provides wireless backhaul and fronthaul solutions that enable cellular operators and other wireless service providers. Its solutions use microwave and millimeter wave radio technology to transfer telecommunication traffic between base stations, small/distributed cells, and the core of the service provider’s network. The company also uses microwave technology for ultra-high speed, ultra-low latency communication for wireless 5G and 4G, 3G, and other cellular base stations.
In addition, it provides IP-20 all-outdoor solutions, such as IP-20C, IP-20C-HP, IP-20S, IP-20E, and IP-20V; IP-20 split-mount/all-indoor solutions comprising IP-20N/IP-20A, IP-20F, and IP-20G; and IP-50 disaggregated solutions, including IP-50E, IP-50C, IP-50S, and IP-50FX for various short-haul, long-haul, fronthaul, and enterprise access applications. Further, the company offers network management system; and network and radio planning, site survey, solutions development, installation, network auditing and optimization, maintenance, training, and other services.
It provides its services to oil and gas companies; public safety organizations; business and public institutions; broadcasters; energy utilities; and private communications networks. The company sells its products through direct sales, original equipment manufacturers, distributors, and system integrators. It operates in North America, Europe, Africa, the Asia Pacific, the Middle East, India, and Latin America.
Website: https://www.ceragon.com
Latest 10-k report: https://sec.report/Document/0001178913-22-001749/
Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for CRNT in the last 3 months, the stock has an average price target of $4.63, which is nearly 85% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Aviat Networks (AVNW) is seeking to acquire It’s offering $2.80 per share for CRNT stock.
- Needham analyst Alex Henderson reiterated a ‘Buy’ rating and $5.25 target price for CRNT.
Analysts | 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.
CRNT – 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 Price above MAs: The stock is currently above its 50-day as well as 200-day SMA, indicating that the bulls have currently gained control.
#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 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#6 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as a pink color dotted line. This is a possible bullish indication.
CRNT – Weekly Chart
#7 MACD above Signal Line: In the weekly chart as well, 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 CRNT is above the price of $2.55.
Target Prices: Our first target is $3.30. If it closes above that level, the second target price is $4.00.
Stop Loss: To limit risk, place a stop loss at $2.10. Note that the stop loss is on a closing basis.
Our target potential upside is 29% to 57%.
For a risk of $0.45, our first target reward is $0.75, and the second target reward is $1.45. 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. CRNT reported net loss of $17.1 million and $14.8 million in the years 2020, and 2021 respectively.
CRNT – Consolidated Statements of Operations
- The company was formerly known as Giganet Ltd. and changed its name to Ceragon Networks Ltd. in September 2000.
- Hedge Funds Decreased Holdings by 180.7K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company has ongoing legal proceedings. On January 6, 2015, the Company was served with a motion to approve a purported class action, naming the Company, its Chief Executive Officer, and its directors as defendants. The purported class action alleges breaches of duties by making false and misleading statements in the Company’s SEC filings and public statements.
- Despite being a loss-making company, the executives are being paid significant compensation. In 2021, the aggregate compensation paid by CRNT consisted of approximately $3.9 million in salary, fees, bonuses, commissions, and directors’ fees and approximately $0.7 million in amounts set aside or accrued to provide pension, retirement, or similar benefits.
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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