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: Tilray Brands, Inc. (NASDAQ: TLRY)
Today’s penny stock pick is the medical cannabis products company, Tilray Brands, Inc. (NASDAQ: TLRY).
Tilray Brands, Inc. engages in the research, cultivation, processing, and distribution of medical cannabis products in Canada, the United States, Europe, Australia, New Zealand, Latin America, and internationally. The company operates through four segments: Cannabis Business, Distribution Business, Beverage Alcohol Business, and Wellness Business.
It also offers medical and adult-use cannabis products; purchases and resells pharmaceutical and wellness products; and produces, markets, sells, and distributes beverage alcohol products, and hemp-based food and other wellness products.
In addition, the company offers its products under the Tilray, Aphria, Broken Coast, Symbios, B!NGO, The Batch, Dubon, Good Supply, Solei, Chowie Wowie, Canaca, RIFF, SweetWater, Breckenridge Distillery, Alpine Beer Company, and Green Flash brands. It sells its products to retailers, wholesalers, patients, physicians, hospitals, pharmacies, researchers, and governments, as well as direct to consumers.
Website: https://www.tilray.com
Latest 10-k report: https://tilray.gcs-web.com/static-files/068f0345-3a0b-4218-9cbb-23f5f82ece94
Analyst Consensus: As per TipRanks Analytics, based on 7 Wall Street analysts offering 12-month price targets for TLRY in the last 3 months, the stock has an average price target of $2.63, which is nearly 37% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company recently secured approval for the first medical cannabis extract in Portugal. With this approval, Tilray is clear to sell its Tilray Oral Solution THC 5 CBD 20. TLRY had already won approval for its whole flower THC 18 in Portugal.
- Vice President Kamala Harris made some promising remarks regarding marijuana’s future drug classification. Harris called on the DEA to immediately change the Schedule 1 label currently in place under the Controlled Substance Act.
- Corporate Insiders placed Informative Buys of Shares Worth $183.2K in the Last 3 Months.
Insiders | Source: TipRanks.com
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Falling Wedge Pattern Breakout: 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 has currently broken out from the falling wedge pattern with a high volume. Once the stock breaks out of the falling wedge pattern, it could move higher.
TLRY – 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.
TLRY – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart and is also moving higher from oversold levels, 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 TLRY is above the price of $2.00.
Target Prices: Our first target is $2.80. If it closes above that level, the second target price is $3.50.
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 40% to 75%.
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. TLRY began operating in 2014 and have yet to generate a profit.
TLRY – Consolidated Statements of Losses
- Hedge Funds Decreased Holdings by 991.9K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company has ongoing legal proceedings. On February 27, 2020, Tilray stockholders Deborah Braun and Nader Noorian filed a class action and derivative complaint in the Delaware Court of Chancery styled Braun v. Kennedy, C.A. No. 2020-0137-KSJM. On March 2, 2020, Tilray stockholders Catherine Bouvier, James Hawkins, and Stephanie Hawkins filed a class action and derivative complaint in the Delaware Court of Chancery styled Bouvier v. Kennedy, C.A. No. 2020-0154-KSJM. Other Class Action Suits and Stockholder Derivative Suits include Authentic Brands Group Related Class Action (New York, United States); Aphria Inc. Securities Litigation (New York, United States); LATAM and Nuuvera Class Actions and Individual Actions (Canada); Langevin Canada Class Action Regarding Alleged Mislabled Products (Alberta, Canada); 420 Investments Ltd. Litigation; Docklight Litigation; and Cannfections Group Inc. / High Park Farms Ltd. and High Park Holdings Ltd. (Canada, Commercial Arbitration).
- Despite being a loss-making company, the executives are being paid significant compensation.
TLRY – Executive Compensation
- The company’s cannabis business is dependent upon regulatory approvals and licenses, ongoing compliance and reporting obligations, and timely renewals. Moreover, the company faces intense competition from other Licensed Producers, other potential competitors, and the illicit cannabis market.
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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