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: 8×8, Inc. (NASDAQ: EGHT)
Today’s penny stock pick is a leading integrated cloud communications platform provider, 8×8, Inc. (NASDAQ: EGHT).
8×8, Inc. provides voice, video, chat, contact center, and enterprise-class application programmable interface (API) Software-as-a-Service solutions for small and mid-size businesses, mid-market and larger enterprises, government agencies, and other organizations worldwide.
It provides 8×8 Work, a self-contained end-to-end united communications solution that delivers enterprise voice with public switched telephone network connectivity, video meetings, and unified messaging, as well as direct messages, public and private team messaging rooms, and short and multimedia services; 8×8 Contact Center, a multi-channel cloud-based contact center solution; and 8×8 CPaaS, a set of global communications Platform-as-a-Service.
The company also offers and X1 through X4 and X5 through X8, which provide enterprise-grade voice, unified communications, and video meetings and team collaboration, and contact center solutions. It markets its services to end users through industry conferences, trade shows, Webinars, and digital advertising channels.
Website: https://www.8×8.com
Latest 10-k report: https://8×8.gcs-web.com/sec-filings/sec-filing/10-k/0001023731-23-000061
Analyst Consensus: As per TipRanks Analytics, based on 11 Wall Street analysts offering 12-month price targets for EGHT in the last 3 months, the stock has an average price target of $5.00, which is a nearly 21% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Sylebra Capital reported a 12.4% position in 8X8, which is about a $60 million stake.
- The company recently reported financial results for the fourth quarter and fiscal year 2023 ended March 31, 2023 and provided a higher earnings estimate.
- Hedge Funds Increased Holdings by 207.6K 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 Downtrend Channel Breakout: The daily chart shows that the stock has broken out of a downtrend channel, which is shown as purple color lines. This is a possible bullish indication.
EGHT – 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 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 looks like a good area for the stock to move higher.
EGHT – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#7 Bullish RSI: In the weekly chart, the RSI is currently nearing 50 and moving higher. 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 EGHT is above the price of $4.20.
Target Prices: Our first target is $6.00. If it closes above that level, the second target price is $8.00.
Stop Loss: To limit risk, place a stop loss at $3.10. Note that the stop loss is on a closing basis.
Our target potential upside is 43% to 90%.
For a risk of $1.10, our first target reward is $1.80, and the second target reward is $3.80. 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. EGHT recorded an operating loss of approximately $66.3 million for the year ended March 31, 2023, and ended the period with an accumulated deficit of approximately $792.9 million.
EGHT – Consolidated Statements of Operations
- Corporate Insiders Sold Shares Worth $211.8K in the Last 3 Months.
Insiders | Source: TipRanks.com
- Despite being a loss-making company, the executives are being paid significant compensation.
EGHT – 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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