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: MacroGenics Inc. (NASDAQ: MGNX)
Today’s penny stock pick is the biopharmaceutical company, MacroGenics Inc. (NASDAQ: MGNX).
MacroGenics Inc. develops and commercializes antibody-based therapeutics to treat cancer in the United States. Its approved product is MARGENZA (margetuximab-cmkb), a human epidermal growth factor receptor 2 (HER2) receptor antagonist indicated, in combination with chemotherapy, for the treatment of adult patients with metastatic HER2-positive breast cancer who have received two or more prior anti-HER2 regimens.
The company’s pipeline of immuno-oncology product candidates includes MGC018, an antibody drug conjugate (ADC), which targets solid tumors expressing B7-H3; Enoblituzumab, a monoclonal antibody that targets B7-H3; and MGD024, an investigational bispecific CD123 × CD3 DART molecule to minimize cytokine-release syndrome for patients with hematologic malignancies.
It also develops Lorigerlimab, a monoclonal antibody that targets the immune checkpoints PD-1 and cytotoxic T-lymphocyte-associated protein 4; Tebotelimab, an investigational tetravalent DART molecule for PD-1 and lymphocyte-activation gene 3; Retifanlimab, an investigational monoclonal antibody targeting metastatic squamous cell carcinoma of the anal canal and metastatic non-small cell lung cancer; and IMGC936, an ADC that targets ADAM9, a cell surface protein over-expressed in various solid tumor types.
Further, the company develops MGD014 and MGD020, a DART molecule to target the envelope protein of human immunodeficiency virus infected cells and CD3 on T cells; Teplizumab for the treatment of type 1 diabetes; and PRV-3279, a CD32B × CD79B DART molecule for the treatment of autoimmune indications. It has collaborations with Incyte Corporation; Zai Lab Limited; I-Mab Biopharma; and Janssen Biotech, Inc.
Website: https://www.macrogenics.com
Latest 10-k report: https://sec.report/Document/0001125345-22-000013
Analyst Consensus: As per TipRanks Analytics, based on 9 Wall Street analysts offering 12-month price targets for MGNX in the last 3 months, the stock has an average price target of $9.29, which is nearly 135% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Gilead Sciences, Inc. (NASDAQ: GILD) and MacroGenics announced an exclusive option and collaboration agreement to develop MGD024, an investigational, bispecific antibody.
- Anticipating FDA approval, Provention Bio and Sanofi US have signed a co-promotion agreement to launch the former’s lead investigational drug candidate, teplizumab for the delay in the onset of clinical type 1 diabetes (T1D). If approved, MGNX will receive $60MM plus royalties, as Provention Bio had licensed the drug from MGNX.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has currently broken out a symmetrical triangle pattern, which is marked as purple color lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper trend line occurs, it usually signifies the start of a new bullish trend.
MGNX – 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 MA: The stock is currently above its 50-day SMA, indicating that the bulls have currently gained control.
#4 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible 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 Downtrend Channel Breakout: The weekly chart shows that the stock has currently broken out of a downtrend channel, which is marked as orange color lines. This is a possible bullish indication.
MGNX – Weekly Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, 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 MGNX is above the price of $4.40.
Target Prices: Our first target is $6.50. If it closes above that level, the second target price is $7.50.
Stop Loss: To limit risk, place a stop loss at $3.70. Note that the stop loss is on a closing basis.
Our target potential upside is 48% to 71%.
For a risk of $0.70, our first target reward is $2.10, and the second target reward is $3.10. This is a nearly 1:3 and 1:4 risk-reward trade.
In other words, this trade offers 3x to 4x more potential upside than downside.
Potential Risks / Red Flags:
- The company has incurred significant losses since its inception. As of December 31, 2021, MGNX’s accumulated deficit was approximately $974 million.
MGNX – Consolidated Statements of Operations and Comprehensive Loss
- Hedge Funds Decreased Holdings by 6.1M Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- On September 13, 2019, a securities class action complaint was filed in the U.S. District Court for the District of Maryland by Todd Hill naming the Company, its Chief Executive Officer, Dr. Koenig, and its Chief Financial Officer, Mr. Karrels, as defendants for allegedly making false and materially misleading statements regarding the Company’s SOPHIA trial.
- Despite being a loss-making company, the executives are being paid significant compensation.
MGNX – 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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