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: Absci Corporation (NASDAQ: ABSI)
Today’s penny stock pick is the biotechnology company that leverages AI, Absci Corporation (NASDAQ: ABSI).
Absci Corporation operates as a data-first generative artificial intelligence (AI) drug creation company in the United States. The company combines AI with scalable wet lab technologies to create biologics for patients. Its integrated drug creation platform is designed to improve upon traditional biologic drug discovery by using AI to simultaneously optimize multiple drug characteristics that may be important to development and therapeutic benefit.
It has a collaboration with Memorial Sloan Kettering Cancer Center to discover novel therapeutics using generative AI; with AstraZeneca PLC for AI-driven drug discovery against an oncology target; and with Twist Bioscience Corporation to design a novel therapeutic using generative AI.
Website: https://www.absci.com/
Latest 10-k report: https://investors.absci.com/static-files/6db4b458-39e6-4ed4-894f-3e3261c9bebb
Analyst Consensus: As per TipRanks Analytics, based on 8 Wall Street analysts offering 12-month price targets for ABSI in the last 3 months, the stock has an average price target of $8.33, which is nearly 67% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- ABSI had recently announced a strategic collaboration with AMD to deploy AMD Instinct™ accelerators and ROCm™ software to power critical AI drug discovery workloads, including Absci’s advanced de novo antibody design models. A $20 Million Equity Investment from AMD is anticipated to strengthen Absci’s Leadership in AI drug discovery.
- Needham analyst Gil Blum noted that Absci Corporation’s value lies in its ability to build in-house proprietary assets and monetize clinical-stage assets through partnerships with leading pharma companies for milestone payments and royalties rather than directly handling commercialization for steady income.
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 was consolidating within a range. This is marked as a purple color rectangle in the chart. Whenever a stock breaks out of the consolidation area, it typically moves higher. The stock has currently broken out of the consolidation area, which is a possible bullish sign.
ABSI – 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.
ABSI – 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 ABSI is above the price of $5.05.
Target Prices: Our first target is $6.10. If it closes above that level, the second target price is $7.00.
Stop Loss: To limit risk, place a stop loss at $4.40. Note that the stop loss is on a closing basis.
Our target potential upside is 21% to 39%.
For a risk of $0.65, our first target reward is $1.05, and the second target reward is $1.95. 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. For the years ended December 31, 2023, and 2022, ABSI incurred net losses of $110.6 million, and $104.9 million, respectively. As of December 31, 2023, the company had an accumulated deficit of $406.5 million.
- The company has a limited operating history and requires additional capital to fund its operations and improve its platform. ABSI is substantially dependent on the successful application of its Integrated Drug Creation platform to initiate and advance partnered programs and to develop its internal asset programs.
ABSI – Consolidated Statements of Operations
- In the years ended December 31, 2023, and 2022, revenue from two partners accounted for 89% and three partners accounted for 98% of the company’s technology development revenue, respectively. If ABSI cannot maintain its current relationships with partners, fails to expand its relationships with current partners, or fails to enter into new relationships, its future operating results will be adversely affected.
- ABSI faces significant competition in the biopharmaceutical platform technology market, from Generate Biomedicines, Inc., Exscientia Limited, GV20 Therapeutics, Alchemab Therapeutics, PrecisionLife, 3T Biosciences, Inc., and Immunome.
- Despite being a loss-making company, the executives are being paid significant compensation.
ABSI – 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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