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: Core Scientific, Inc. (NASDAQ: CORZ)
Today’s penny stock pick is the largest blockchain infrastructure, hosting provider, and digital asset miner in North America, Core Scientific, Inc. (NASDAQ: CORZ).
Core Scientific, Inc. provides digital asset mining services in North America. It operates through two segments, Mining and Hosting. The company offers blockchain infrastructure, software solutions, and services; and operates data center mining facilities.
It also mines digital assets for its own account; and provides hosting services for other large Bitcoin miners, which include deployment, monitoring, trouble shooting, optimization, and maintenance of its customers’ digital asset mining equipment. In addition, the company provides electrical power, repair, and other infrastructure services to operate, maintain, and earn digital assets; and sells mining equipment to customers.
Website: https://corescientific.com
Latest 10-k report: https://investors.corescientific.com/sec-filings/all-sec-filings/content/0001628280-24-010682/core-20231231.htm
Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for CORZ in the last 3 months, the stock has an average price target of $6.75, which is nearly 40% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company had announced a multi-year contract to supply up to 16 MW of data center infrastructure to CoreWeave. This will support AI and High-Performance Computing (HPC) Workloads in Long Term Hosting. The total potential revenue associated with the contract is more than $100 million and is anticipated to be accretive to 2024 earnings.
- Corporate Insiders placed Informative Buys of Shares Worth $1.2M 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 Breakout From Consolidation Area: The daily chart shows that the stock has currently broken out of a consolidation area, which is marked as a purple color rectangle. This is a possible bullish indication.
CORZ – 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.
CORZ – Weekly Chart
#6 MACD above Signal Line: In the weekly chart as well, 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 CORZ is above the price of $4.85.
Target Prices: Our first target is $6.10. If it closes above that level, the second target price is $7.20.
Stop Loss: To limit risk, place a stop loss at $4.10. Note that the stop loss is on a closing basis.
Our target potential upside is 26% to 48%.
For a risk of $0.75, our first target reward is $1.25, and the second target reward is $2.35. 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. CROZ reported net losses of $246.5 million and $2.15 billion for the years ended December 31, 2023, and 2022, respectively.
CORZ – Consolidated Statements of Operations
- Core Scientific had filed for Chapter 11 bankruptcy in December 2022 amid falling crypto prices and a string of major industry failures including the bankruptcies of Sam Bankman-Fried’s FTX, crypto lender Celsius Network LLC, and crypto hedge fund Three Arrows Capital. The company is just recently emerging from the Chapter 11 Cases. This could adversely affect the company’s business, reputation and relationships with vendors, suppliers, service providers, customers, employees, and other third parties.
- The company’s business is capital intensive, as the costs of constructing, developing, operating and maintaining digital asset mining and facilities, and owning and operating a large fleet of the latest generation mining equipment, are substantial. Any failure to obtain the necessary capital when needed may have a material adverse effect on the company’s business, financial condition, and results of operations.
- Digital assets, and bitcoin, in particular, are subject to price volatility. CORZ currently generates almost all of its revenue from bitcoin rewards that is earned through self-mining in its facilities. If the price of bitcoin or other digital assets declines, the company’s profitability will decline.
- The company has a history of paying hundreds of millions as executive compensation, despite being a loss-making company historically.
CORZ – 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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