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: Aridis Pharmaceuticals Inc. (NASDAQ: ARDS)
Today’s penny stock pick is the late-stage biopharmaceutical company, Aridis Pharmaceuticals Inc. (NASDAQ: ARDS).
Aridis Pharmaceuticals Inc. focuses on the discovery and development of targeted immunotherapy using fully human monoclonal antibodies (mAb) to treat life-threatening infections. Its lead product candidate is AR-301, a fully human mAb of immunoglobulin 1 (IgG1) that is in Phase III pivotal trials for the treatment of lung infections resulting from S. aureus alphatoxin.
The company is also developing AR-320, a fully human IgG1 monoclonal antibody targeting S. aureus alpha toxin to treat infections caused by methicillin-resistant Staphylococcus aureus and methicillin-susceptible S. aureus; AR-105, a fully human IgG1 mAb, which is in Phase II trials to target gram-negative bacteria P. aeruginosa; AR-101, a human IgM mAb, which is in Phase IIa clinical trials for the treatment of hospital-acquired pneumonia (HAP)and ventilator-associated pneumonia (VAP) caused by P. aeruginosa serotype O11; AR-401 that is in preclinical stage to treat infections caused by Acinetobacter baumannii; AR-201, a fully human IgG1 mAb preclinical program for respiratory syncytial virus; and AR-501, an anti-infective therapy, which is in Phase I/IIa clinical trial to manage chronic lung infections in cystic fibrosis patients.
In addition, it is developing AR-712 and AR-701, a cocktail of two fully human immunoglobulin 1, or IgG1, mAbs, which is in Phase I/II clinical for the treatment of mild to moderate non-hospitalized COVID-19 patients.
Website: https://www.aridispharma.com
Latest 10-k report: https://sec.report/Document/0001104659-22-045482
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for ARDS in the last 3 months, the stock has an average price target of $19.00, which is nearly 890% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Upcoming Phase 3 results of AR-301, is a fully human IgG1 mAb being evaluated in a global Phase 3 clinical study as an adjunctive treatment of S. aureus ventilator associated pneumonia (VAP).
- Phase 3 is expected to be initiated in 2Q22 for AR-320, a fully human IgG1 mAb targeting S. aureus alpha-toxin that is being developed as a preventative treatment of S. aureus colonized mechanically ventilated patients who do not yet have VAP.
- Upcoming Phase 2 results of AR-501, an inhaled formulation of gallium citrate with broad-spectrum anti-infective activity being developed to treat chronic lung infections in cystic fibrosis patients.
- ARDS is expected to initiate a Phase 1/2 clinical trial late in the second half of 2022 to evaluate AR-701, a neutralising monoclonal antibody that potentially acts as a potent universal coronavirus therapy against SARS-CoV-2 and all its variants of concern, including Beta, Gamma, Delta, Epsilon, and Omicron.
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.
ARDS – 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 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#5 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.
#6 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.
ARDS – Weekly Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for ARDS is above the price of $1.98.
Target Prices: Our first target is $2.60. If it closes above that level, the second target price is $3.20.
Stop Loss: To limit risk, place a stop loss at $1.60. Note that the stop loss is on a closing basis.
Our target potential upside is 31% to 62%.
For a risk of $0.38, our first target reward is $0.62, and the second target reward is $1.22. 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. For the year ending December 31, 2021, the company reported a net loss of approximately $42.2 million. As of December 31, 2021, ARDS had an accumulated deficit of $165.3 million.
ARDS – Consolidated Statements of Operations
- The company has ongoing legal proceedings.
- A complaint was filed in February 2020 in the New York State Supreme Court against the Company by an investor who invested in the Company’s preferred stock in July 2017 prior to the Company’s IPO in August 2018. The complaint alleges, among other things, that the Company breached its contract and fiduciary duty, by not issuing additional securities to the investor as a result of the Company’s IPO.
- In September 2021, Cantor filed a complaint in the New York State Supreme Court against the Company alleging that it breached a letter agreement with Cantor and owes Cantor approximately $1.8 million, including attorney’s fees for a financing fee related to the Company’s equity offering in August 2021.
- Despite being a loss-making company, the executives are being paid significant compensation.
ARDS – 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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