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: OPKO Health, Inc. (NASDAQ: OPK)
Today’s penny stock pick is the healthcare company, OPKO Health, Inc. (NASDAQ: OPK).
OPKO Health, Inc. engages in the diagnostics and pharmaceuticals businesses in the United States, Ireland, Chile, Spain, Israel, Mexico, and internationally.
The company’s Diagnostics segment operates BioReference Laboratories that offers laboratory testing services for the detection, diagnosis, evaluation, monitoring, and treatment of diseases, including esoteric testing, molecular diagnostics, anatomical pathology, genetics, women’s health, and correctional healthcare to physician offices, clinics, hospitals, employers, and governmental units; and 4Kscore prostate cancer test. Its Pharmaceutical segment offers Rayaldee to treat secondary hyperparathyroidism in adults with stage 3 or 4 chronic kidney disease, and vitamin D insufficiency.
This segment also develops multi-specific immune therapies focused on oncology, infectious diseases, vaccines, and immunology; OPK88004, an orally administered selective androgen receptor modulator; OPK88003, a once-weekly administered peptide for the treatment of type 2 diabetes and related obesity; Somatrogon (hGH-CTP), a once-weekly human growth hormone injection; and Factor VIIa-CTP, a novel long-acting coagulation factor being developed to treat hemophilia.
In addition, it develops and commercializes longer-acting proprietary versions of already approved therapeutic proteins; develops and produces specialty APIs; develops, manufactures, markets, and sells pharmaceutical, nutraceutical, veterinary, and ophthalmic products; commercializes food supplements and over-the-counter products; manufactures and sells products primarily in the generics market; and markets, distributes, and sells pharmaceutical products in a range of indications, including cardiovascular products, vaccines, antibiotics, gastro-intestinal products, hormones, and others. The company also operates pharmaceutical platforms in Ireland, Chile, Spain, and Mexico.
Website: https://www.opko.com
Latest 10-k report: https://www.opko.com/investors/sec-filings/all-sec-filings/content/0001437749-24-006285/0001437749-24-006285.pdf
Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analysts offering 12-month price targets for OPK in the last 3 months, the stock has an average price target of $3.17, which is nearly 126% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Labcorp has agreed to acquire select assets of BioReference Health, a New Jersey-based lab operator owned by OPKO Health for $237.5M in a deal expected to close in H2 2024.
- Corporate Insiders placed Informative Buys of Shares Worth $9.5M in the Last 3 Months.
Insiders | Source: TipRanks.com
- C. Wainwright analyst Yi Chen recently reiterated a Buy rating on Opko Health and set a price target of $3.00. The rating is based on the company’s strategic business moves and promising pharmacokinetic data for a novel therapeutic candidate.
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. Once the stock breaks out of the falling wedge pattern, it could move higher.
OPK – 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 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#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.
OPK – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#7 MACD above Signal Line: In the weekly chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for OPK is above the price of $1.45.
Target Prices: Our first target is $2.40. If it closes above that level, the second target price is $3.20.
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 65% to 121%.
For a risk of $0.55, our first target reward is $0.95, and the second target reward is $1.75. 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.
OPK – Consolidated Statements of Operations
- Hedge Funds Decreased Holdings by 337.7K Shares Last Quarter.
Hegde Funds | Source: TipRanks.com
- The company has ongoing legal proceedings.
- In February 2023, the Office of the Attorney General for the State of Texas informed BioReference that it believes that, from 2005 to the present, BioReference may have violated the Texas Medicaid Fraud Prevention Act with respect to claims it presented to Texas Medicaid for reimbursement.
- On December 29, 2022, the Israel Tax Authority issued an assessment against our subsidiary, OPKO Biologics in the amount of approximately $246 million (including interest) related to uncertain tax positions involving income recognition in connection with an examination of foreign tax returns for the 2014 through 2020 tax years.
- On March 1, 2019, the Company received a Civil Investigative Demand from the U.S. Department of Justice, Washington, DC. The CID sets forth document requests and interrogatories in connection with allegations that the Company and certain of its affiliates violated the False Claims Act and/or the Anti-Kickback Statute.
- Despite being a loss-making company, the executives are being paid significant compensation.
OPK – 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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