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: Medical Properties Trust, Inc. (NYSE: MPW)
Today’s penny stock pick is the real estate investment trust, Medical Properties Trust, Inc. (NYSE: MPW).
Medical Properties Trust, Inc. is a self-advised real estate investment trust formed in 2003 to acquire and develop net-leased hospital facilities. From its inception in Birmingham, Alabama, the Company has grown to become one of the world’s largest owners of hospital real estate with 441 facilities and approximately 44,000 licensed beds as of September 30, 2023.
Since the end of the third quarter, the Company has sold four facilities and now owns approximately 43,000 licensed beds in nine countries across three continents. MPW’s financing model facilitates acquisitions and recapitalizations and allows operators of hospitals to unlock the value of their real estate assets to fund facility improvements, technology upgrades, and other investments in operations.
Website: https://www.medicalpropertiestrust.com
Latest 10-k report: https://medicalpropertiestrust.gcs-web.com/node/15171/html
Analyst Consensus: As per TipRanks Analytics, based on 6 Wall Street analysts offering 12-month price targets for MPW in the last 3 months, the stock has an average price target of $5.50, which is nearly 10% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The stock is highly shorted. This could cause a Short Squeeze, resulting in a rally in the prices of the stock.
- As per the latest Q3 reports, the company’s rental revenues are still up by +$8M QoQ, attributed to its rental escalators tied to the Consumer Price Index, implying its robust near-term prospects.
- MPW now offers a compelling forward dividend yield, thanks to its depressed stock prices.
- Hedge Funds Increased Holdings by 6.2M 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 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.
MPW – Daily Chart
#2 Price above MA: The stock is currently above its 50-day SMA, indicating that the bulls have currently gained control.
#3 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.
#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 purple color dotted line. This looks like a good area for the stock to move higher.
MPW – 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.
#7 Oversold RSI: The RSI is currently moving higher from oversold levels in the weekly chart, indicating bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for MPW is above the price of $5.05.
Target Prices: Our first target is $6.00. If it closes above that level, the second target price is $6.70.
Stop Loss: To limit risk, place a stop loss at $4.50. Note that the stop loss is on a closing basis.
Our target potential upside is 19% to 33%.
For a risk of $0.55, our first target reward is $0.95, and the second target reward is $1.65. 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 customer concentration risk. As of December 31, 2022, MPW’s largest tenants – Steward, Circle, Prospect, Priory, and Springstone – represented 24.2%, 10.5%, 7.5%, 6.6%, and 5.0%, respectively, of the company’s total assets.
- Many of MPW’s tenants have an option to purchase the facilities leased to them, which could disrupt the company’s operations.
- The company has significant debt. As of February 17, 2023, MPW had approximately $10.3 billion of debt outstanding. Failure to hedge effectively against interest rate changes may also adversely affect the company’s results of operations.
- The quickly rising interest rates have hurt the company’s valuation and also forced the company to grow at a slower pace. During 2023, Medical Properties found itself in need of de-leveraging and has sold off some properties to do so. MPW also was forced to cut its dividend almost in half in September in order to help it pay off debt and increase flexibility.
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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