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: Sharecare, Inc. (NASDAQ: SHCR)
Today’s penny stock pick is the digital healthcare platform company, Sharecare, Inc. (NASDAQ: SHCR).
Sharecare, Inc. operates as a digital healthcare platform company. Its Sharecare platform connects people, patients, providers, employers, health plans, government organizations, and communities that optimize individual and population-wide well-being. The company offers enterprise solutions based on a software-as-a-service model that allows enterprise clients to message, motivate, and manage their populations, as well as measure their population progress; a suite of data and information-driven solutions; and life sciences solutions, which provides members with personalized information, programs, and resources to enhance their health and well-being.
It also operates RealAge, a platform for health assessment to assess behaviors and existing conditions of its members and provide metric for their physical health. In addition, the company provides secure, automated release of information, audit, and business consulting services to streamline the medical records process for medical facilities. It sells its solutions through direct sales organization and partner relationships.
Website: https://www.sharecare.com
Latest 10-k report: https://investors.sharecare.com/static-files/f6bc979a-0aad-4eb1-af0b-5a2c5add9f09
Analyst Consensus: Not Covered By Wall Street Analysts.
Potential Catalysts / Reasons for the Hype:
- SHCR recently received a proposal from a private equity firm to buy the company’s available shares. The company received preliminary non-binding proposal to be acquired at between $1.35 and $1.80 per share.
- The company has seen investment from Anthem, now called Elevance. Sharecare also has a relationship with Amazon, as it has integrated its library of more than 80,000 questions and answers into the Alexa voice service from Amazon.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Falling Wedge Pattern: 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 currently looks poised for a breakout from the falling wedge pattern. Once the stock breaks out of the falling wedge pattern, it could move higher.
SHCR – 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.
SHCR – 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.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for SHCR is above the price of $1.24.
Target Prices: Our first target is $1.80. If it closes above that level, the second target price is $2.40.
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 45% to 94%.
For a risk of $0.34, our first target reward is $0.56, and the second target reward is $1.16. 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. SCHR has incurred net losses of $60.0 million, $85.0 million, and $118.7 million, for the years ended December 31, 2020, 2021, and 2022, respectively.
SHCR – Consolidated Statements of Operations
- The company is party to investigations and legal disputes and losses related to certain matters.
- Hedge Funds Decreased Holdings by 634.4K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company has customer concentration risk. For instance, one client accounted for 16%, 11%, and 9% of the company’s revenue for the years ended December 31, 2020, 2021, and 2022, respectively; while the top 10 clients accounted for 44%, 40%, and 40% of the company’s revenue, respectively.
- Despite being a loss-making company, the executives are being paid significant compensation.
SHCR – 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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