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: Adaptimmune Therapeutics PLC – ADR (NASDAQ: ADAP)
Today’s penny stock pick is the clinical-stage biopharmaceutical company, Adaptimmune Therapeutics PLC – ADR (NASDAQ: ADAP).
Adaptimmune Therapeutics PLC focuses on providing novel cell therapies primarily to patients with solid tumors in the United States and the United Kingdom. The company’s specific peptide enhanced affinity receptor (SPEAR) T-cell platform enables it to identify cancer targets.
It is developing ADP-A2M4 that is in phase II clinical trials with SPEARHEAD-1 for synovial sarcoma and myxoid round cell liposarcoma indications (MRCLS); in phase II clinical trials with SPEARHEAD-2 for patients with head and neck cancer; and in phase I clinical trials for urothelial, melanoma, head and neck, ovarian, non-small cell lung, esophageal and gastric, synovial sarcoma, and MRCLS cancers.
The company is also developing ADP-A2AFP, which is in phase I clinical trials for hepatocellular carcinoma; and ADP-A2M4CD8, which is in phase I clinical trial for SPEAR T-cells focusing on treating patients with lung, gastroesophageal, head and neck, ovarian, and bladder cancers.
It has a collaboration and license agreement with GSK; third party collaborations with Noile-Immune Biotech Inc., Alpine Immune Sciences, Inc., and National Center for Cancer Immune Therapy in Denmark; strategic alliance agreement with the MD Anderson Cancer Center; and co-development and co-commercialization agreement with Universal Cells, Inc. Adaptimmune Therapeutics plc also has a strategic collaboration and license agreement with Genentech, Inc. and F. Hoffman-La Roche Ltd to develop personalized allogeneic T-cell therapies utilizing aß T-cell receptors.
Website: https://www.adaptimmune.com
Latest 10-k report: https://sec.report/Document/0001558370-22-003489
Analyst Consensus: As per TipRanks Analytics, based on 6 Wall Street analysts offering 12-month price targets for ADAP in the last 3 months, the stock has an average price target of $5.25, which is nearly 108% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company reported an Increased Response Rate and Durability of Response in Its Phase 1 SURPASS trial. Across the entire ongoing Phase 1 SURPASS trial, the ORR has increased to 37% from 33%, and the median duration of response has increased to ~20 weeks from ~12 weeks since the last update.
- In an exploratory study of patients with various solid tumors, the company’s modified T-cell therapy, known as ADP-A2M4CD8, reportedly produced an overall response rate of 43% in patients with advanced ovarian cancer.
- Hedge Funds Increased Holdings by 23.0K Shares Last Quarter.
Hedge Funds | 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.
ADAP – 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.
ADAP – 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 ADAP is above the price of $2.55.
Target Prices: Our first target is $3.50. If it closes above that level, the second target price is $5.00.
Stop Loss: To limit risk, place a stop loss below $2.00. Note that the stop loss is on a closing basis.
Our target potential upside is 37% to 96%.
For a risk of $0.55, our first target reward is $0.95, and the second target reward is $2.45. This is a nearly 1:2 and 1:5 risk-reward trade.
In other words, this trade offers 2x to 5x more potential upside than downside.
Potential Risks / Red Flags:
- The company has a history of net losses. For the years ended December 31, 2021, 2020, and 2019, ADAP incurred net losses of $158.1 million, $130.1 million, and $137.2 million respectively. As of December 31, 2021, the company had accumulated losses of $743.8 million.
ADAP – Consolidated Statements of Operations
- Despite being a loss-making company, the executives are being paid significant compensation.
ADAP – Executive Compensation
- The company has never commercialized a product. The company’s ability to commercialize is dependent on ADAP’s ability to increase manufacturing capacity, set up processes, and recruit employees required for such commercialization.
- ADAP requires additional financing for completing the development and commercialization of our cell therapies. The company may seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships and alliances, and licensing arrangements. Raising additional capital may cause dilution to existing shareholders, restrict ADAP’s operations or require the company to relinquish rights to its technologies or product candidate.
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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