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: Applied Therapeutics, Inc. (NASDAQ: APLT)
Today’s penny stock pick is the clinical-stage biopharmaceutical company, Applied Therapeutics, Inc. (NASDAQ: APLT).
Applied Therapeutics, Inc. develops novel products to target central nervous system rare disease and diabetic complications in the United States. Its lead product candidate is AT-007 which has completed phase III for the treatment of galactosemia in healthy volunteers and adults, as well as is in pediatric clinical study for the treatment of galactosemia in kids; for treating sorbitol dehydrogenase deficiency; and for the treatment of phosphomannomutase enzyme-CDG. The company also develops AT-001 which is in phase III clinical trials to treat diabetic cardiomyopathy, as well as for the treatment of diabetic peripheral neuropathy; and AT-003, which is in preclinical studies for the treatment diabetic retinopathy.
Website: https://www.appliedtherapeutics.com
Latest 10-k report: https://ir.appliedtherapeutics.com/sec-filings/sec-filing/10-k/0001558370-23-004398
Analyst Consensus: As per TipRanks Analytics, based on 1 Wall Street analyst offering 12-month price targets for APLT in the last 3 months, the stock has an average price target of $14.00, which is nearly 678% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company announced the completion of a successful pre-New Drug Application (NDA) meeting with the FDA recently regarding its lead asset govorestat. Based on interactions with the agency, the company plans to submit an NDA for govorestat in Q4 2023, targeting the rare metabolic disorder Galactosemia.
- Phase 3 INSPIRE Trial of govorestat in Sorbitol Dehydrogenase (SORD) Deficiency and ARISE-HF Trial of AT-001 in Diabetic Cardiomyopathy on track for data readouts in 2H 2023.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Consolidation Area: The daily chart shows that the stock has been consolidating within a price range for the past several weeks. This is shown as a purple color rectangle. The stock currently looks poised for a breakout. This is a possible bullish indication.
APLT – 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 SMA as well as 200-day SMA, indicating that the bulls have 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.
# 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 purple color dotted line. This looks like a good area for the stock to move higher. The stock is also trading above its 50-week SMA, indicating that the bulls are gaining control.
APLT – Weekly Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, 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 APLT is above the price of $1.95.
Target Prices: Our first target is $2.70. If it closes above that level, the second target price is $3.30.
Stop Loss: To limit risk, place a stop loss at $1.50. Note that the stop loss is on a closing basis.
Our target potential upside is 38% to 69%.
For a risk of $0.45, our first target reward is $0.75, and the second target reward is $1.35. 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. APLT’s net loss was $82.5 million and $105.6 million for the years ended December 31, 2022, and 2021, respectively. As of December 31, 2022, the company had an accumulated deficit of $348.8 million.
APLT – Consolidated Statements of Operations
- The company may need to raise additional capital to finance its operations. This may cause dilution to the stockholders and restrict the company’s operations or require APLT to relinquish rights to its product candidates.
- On November 15, 2022, APLT received a deficiency letter from the staff of the Listing Qualifications Department of the Nasdaq Stock Market, notifying that the company was not in compliance with Listing Rule 5450(b)(1)(A), which requires a minimum of $10 million in stockholders’ equity, for companies listed under the NASDAQ Global Market, referred to as the equity rule. If the company fails to regain compliance with the continued listing requirements of Nasdaq, its common stock may be delisted and the price of common stock and the company’s ability to access the capital markets could be negatively impacted.
- Despite being a loss-making company, the executives are being paid significant compensation.
APLT – 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.