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: Sabre Corporation (NASDAQ: SABR)
Today’s penny stock pick is the travel technology company, Sabre Corporation (NASDAQ: SABR).
Sabre Corporation provides software and technology solutions for the travel industry worldwide. It operates in two segments, Travel Solutions and Hospitality Solutions.
The Travel Solutions segment operates a business-to-business travel marketplace that offers travel content, such as inventory, prices, and availability from a range of travel suppliers, including airlines, hotels, car rental brands, rail carriers, cruise lines, and tour operators with a network of travel buyers comprising online and offline travel agencies, travel management companies, and corporate travel departments.
This segment also provides a portfolio of software technology products and solutions through software-as-a-service (SaaS) and hosted delivery models to airlines and other travel suppliers. Its products include reservation systems for carriers, commercial and operations products, agency solutions, and data-driven intelligence solutions. The Hospitality Solutions segment provides software and solutions to hoteliers through SaaS and hosted delivery models.
Website: https://www.sabre.com
Latest 10-k report: https://investors.sabre.com/node/16681/html
Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for SABR in the last 3 months, the stock has an average price target of $4.50, which is nearly 11% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company’s heavy IT investments are anticipated to finally pay off in 2024, bringing in a lot of cost savings for Sabre. There is also strong travel demand, both now and into 2024.
- Hedge Funds Increased Holdings by 1.9M Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The recent slide in interest rates and expectations for rate cuts in 2024 is anticipated to help Sabre refinance its debt.
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.
SABR – 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 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.
SABR – 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 SABR is above the price of $4.10.
Target Prices: Our first target is $4.90. If it closes above that level, the second target price is $5.60.
Stop Loss: To limit risk, place a stop loss at $3.60. Note that the stop loss is on a closing basis.
Our target potential upside is 20% to 37%.
For a risk of $0.50, our first target reward is $0.80, and the second target reward is $1.50. 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.
SABR – Consolidated Statements of Operations
- The company has ongoing legal proceedings, like the US Airways Antitrust Litigation alleging violations of the Sherman Act Section 1, Indian Income Tax Litigation, and Indian Service Tax Litigation.
- Despite being a loss-making company, the executives are being paid millions as compensation.
- The company operates in a highly competitive sector. Travel technology is rapidly evolving as travel suppliers seek new or improved means of accessing their customers and increasing value. SABR must continue to innovate and evolve to respond to the changing needs of travel suppliers and meet intense competition.
- SABR has a significant amount of indebtedness. As of December 31, 2022, the company has $4.7 billion of indebtedness outstanding.
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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