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: Nextdoor Holdings, Inc. (NYSE: KIND)
Today’s penny stock pick is the locally focused social media company, Nextdoor Holdings, Inc. (NYSE: KIND).
Nextdoor Holdings, Inc. operates a neighborhood network that connects neighbors, businesses, and public services in the United States and internationally. The company enables neighbors and organizations to get information, give and get help, and build connections. It also offers advertising solutions, designs to generate value for businesses for connection and sales expansion.
Website: https://www.nextdoor.com/
Latest 10-k report: https://d18rn0p25nwr6d.cloudfront.net/CIK-0001846069/b41eeab1-105c-4cd7-b064-d614b1ea4b02.pdf
Analyst Consensus: As per TipRanks Analytics, based on 5 Wall Street analysts offering 12-month price targets for KIND in the last 3 months, the stock has an average price target of $2.45.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company reported positive results in Q1 CY2024, with revenue up 6.8% year on year to $53.15 million. Guidance for next quarter’s revenue was also optimistic at $58 million at the midpoint.
- Hedge Funds Increased Holdings by 4.1M Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company announced three additions to its board, including former Yahoo CEO Marissa Mayer, Wayfair, CEO Niraj Shah, and Glassdoor co-founder and chairman Robert Hohman.
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 had recently formed a Symmetrical Triangle pattern. This is a continuation pattern and is characterized by two converging trend lines connecting a series of sequential peaks and troughs. This pattern is marked on the daily chart as purple color lines. The breakout from a symmetrical triangle pattern usually signifies a bullish move. Currently, the stock has broken out of the symmetrical triangle pattern which is a possible bullish sign.
KIND – 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. The stock is also trading above its 50-week SMA, indicating that the bulls are gaining control.
KIND – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, 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 KIND is above the price of $2.50.
Target Prices: Our first target is $3.50. If it closes above that level, the second target price is $4.50.
Stop Loss: To limit risk, place a stop loss at $1.90. Note that the stop loss is on a closing basis.
Our target potential upside is 40% to 80%.
For a risk of $0.60, our first target reward is $1.00, and the second target reward is $2.00. 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. KIND reported net losses of $147.8 million, $137.9 million, and $95.3 million for the years ended December 31, 2023, 2022, and 2021, respectively.
KIND – Consolidated Statements of Operations
- KIND currently generates almost all of its revenue from advertising. If advertisers reduce or eliminate their spending with the company, its business, operating results, and financial condition would be adversely impacted.
- The company is currently involved in and has been subject to actual and threatened litigation with respect to third-party patents, trademarks, copyrights and other intellectual property, and may continue to be subject to intellectual property litigation and threats thereof.
- Despite being a loss-making company, the executives are being paid significant compensation.
KIND – Executive Compensation
- The company’s business is highly competitive. KIND competes in almost every aspect of its business with companies that provide a variety of internet products, services, content, and online advertising.
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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