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: Satellogic Inc. (NASDAQ: SATL)
Today’s penny stock pick is the integrated geospatial company, Satellogic Inc. (NASDAQ: SATL).
Satellogic Inc. operates as an integrated geospatial company in the Asia Pacific, North America, and internationally. It engages in tasking satellites with monitoring assets and keeping up with their changing reality for government and commercial customers; control satellites on top of specific areas of interest for governments; and sale and support satellites.
Website: https://satellogic.com/
Latest 10-k report: https://investors.satellogic.com/static-files/043e184a-068b-4b18-aee8-7abc9bf77f3b
Analyst Consensus: Not Covered By Wall Street Analysts.
Potential Catalysts / Reasons for the Hype:
- The company secured a multi-year contract with the Brazilian Air Force to provide low-latency satellite imagery for defense and security operations. The agreement includes an initial one-year term with a one-year extension option. This marks SATL’s entry into the lucrative defense market with potential for expansion across Latin America
- Maxar Intelligence and Satellogic, Inc. had previously announced a tasking, data licensing, and distribution agreement that enhances Maxar’s ability to deliver monitoring and change detection insights in near real-time for the U.S. government, and the government’s partners around the world.
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 has currently broken out a symmetrical triangle pattern, which is marked as purple color lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper trend line occurs, it usually signifies the start of a new bullish trend.
SATL – 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 as well as 200-day SMA, indicating that the bulls are gaining control.
SATL – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#7 Bullish RSI: In the weekly chart, the RSI is above 50 and moving higher. 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 SATL is above the price of $4.65.
Target Prices: Our first target is $6.00. If it closes above that level, the second target price is $7.00.
Stop Loss: To limit risk, place a stop loss at $3.90. Note that the stop loss is on a closing basis.
Our target potential upside is 29% to 51%.
For a risk of $0.75, our first target reward is $1.35, 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. As of December 31, 2023, SATL had an accumulated deficit of $283.8 million.
SATL – Consolidated Statements of Operations
- SATL is an early-stage company that has not demonstrated a sustained ability to generate revenues. To date, the company has relied heavily on equity and debt financing to fund its business and operations. SATL is currently generating revenue from agreements with a commercial space technology customer and a governmental customer, as well as from a base of smaller customer contracts.
- The company has customer concentration risk. In 2023, four customers accounted for more than 10% of total revenue, and in 2022, two customers accounted for 10% of total revenue.
- SATL faces significant competition for its EO services from commercial satellite imagery companies, state-owned imagery providers, aerial imagery companies, free sources of imagery, and unmanned aerial vehicles.
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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