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: Hims & Hers Health, Inc. (NYSE: HIMS)
Today’s penny stock pick is an American telehealth company, Hims & Hers Health, Inc. (NYSE: HIMS).
Hims & Hers Health, Inc. operates a multi-specialty telehealth platform that connects consumers to licensed healthcare professionals. The company offers a range of health and wellness products and services available to purchase on its websites and mobile application directly by customers.
It also provides prescription medication on a recurring basis and ongoing care from healthcare providers; and over-the-counter drug and device products, cosmetics, and supplement products, primarily focusing on wellness, sexual health and wellness, skincare, and hair care.
The company’s curated non-prescription products include vitamin C, melatonin, biotin, and collagen protein supplements in the wellness category; moisturizer, serums, and face wash in the skincare category; condoms, climax delay spray and wipes, vibrators, and lubricants in the sexual health and wellness category; and shampoos, conditioners, scalp scrubs, and topical treatments, such as minoxidil in the hair care category. In addition, it offers medical consultation services, as well as health and wellness products through wholesale partners.
Website: https://www.forhims.com
Latest 10-k report: https://sec.report/Document/0001773751-22-000039
Analyst Consensus: As per TipRanks Analytics, based on 6 Wall Street analysts offering 12-month price targets for HIMS in the last 3 months, the stock has an average price target of $7.50, which is nearly 62% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Hedge Funds Increased Holdings by 2.2K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company recorded a surge in third-quarter sales and raised its full-year outlook.
- Hims & Hers has expanded into retail stores; the company has products in chains like Walmart, Walgreens, Target, and more.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Symmetrical Triangle Pattern: The daily chart shows that the stock is currently forming 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.
HIMS – Daily Chart
#2 Bullish RSI: The RSI is currently 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 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 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.
HIMS – 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.
#8 Bullish Stoch: In the weekly chart as well, the %K line (blue color) is currently above the %D 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 HIMS is above the price of $4.75.
Target Prices: Our first target is $6.00. If it closes above that level, the second target price is $7.00.
Stop Loss: To limit risk, place a stop loss below $4.00. Note that the stop loss is on a closing basis.
Our target potential upside is 26% to 108%.
For a risk of $0.75, our first target reward is $1.25, and the second target reward is $2.60. 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. The company incurred net losses of $72.1 million, $18.1 million, and $107.7, million in the years ended December 31, 2019, 2020, and 2021, respectively.
HIMS – Consolidated Statements of Operations and Comprehensive Loss
- The company commenced offering products and services in 2017. HIMS’ limited operating history and evolving business make it difficult to evaluate the current business and future prospects.
- Despite being a loss-making company, the executives are being paid millions in compensation.
HIMS – 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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