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: Pagaya Technologies Ltd. (NASDAQ: PGY)
Today’s penny stock pick is the financial technology company, Pagaya Technologies Ltd. (NASDAQ: PGY).
Pagaya Technologies Ltd. Is an AI-driven consumer lending platform. It primarily develops and implements proprietary artificial intelligence technology and related software solutions to assist partners to originate loans and other assets. The company’s partners include high-growth financial technology companies, incumbent banks and financial institutions, auto finance providers, and residential real estate service providers.
Website: https://www.pagaya.com
Latest 10-k report: https://investor.pagaya.com/static-files/9e580f8c-1788-433e-8142-5ca40fb8dad5
Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for PGY in the last 3 months, the stock has an average price target of $1.78, which is nearly 44% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company reported robust first-quarter earnings report. Network volume increased 12% over last year to $1.85 billion, and revenue increased 9% to $187 million.
- Pagaya has a strong operating network that both confirms its existing success and supports the company’s growth in the future. The company partners with many strong brands, including Visa and SoFi, and works with a broad range of credit products.
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.
PGY – 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 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as a purple color dotted line. This looks like a good area for the stock to move higher.
PGY – Weekly Chart
#6 MACD above Signal Line: In the weekly chart, 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 PGY is above the price of $1.30.
Target Prices: Our first target is $2.00. If it closes above that level, the second target price is $2.70.
Stop Loss: To limit risk, place a stop loss at $0.90. Note that the stop loss is on a closing basis.
Our target potential upside is 54% to 108%.
For a risk of $0.40, our first target reward is $0.70, and the second target reward is $1.40. 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 ended December 31, 2022, and 2021, PGY incurred net losses of $302.3 million and $91.2 million, respectively.
PGY – Consolidated Statements of Operations
- Despite being a loss-making company, the executives are being paid significant compensation. As per the 20-F report, the following are the expenses recorded in 2022 for the company’s top executive officers.
- Gal Krubiner, Chief Executive Officer – $3.0 million in salary and bonus expenses.
- Avital Pardo, Chief Technology Officer – $2.7 million in salary and bonus expenses.
- Yahav Yulzari, Chief Revenue Officer – $2.7 million in salary and bonus expenses.
- Michael Kurlander, Chief Financial Officer – $1.0 million in salary and bonus expenses.
- Tami Rosen, Chief People Officer – $1.0 million in salary and bonus expenses.
- Hedge Funds Decreased Holdings by 19.5M Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The industry in which PGY operate is highly competitive, and if the company fails to compete effectively, it could experience price reductions, reduced margins, or loss of revenues.
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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