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: Algonquin Power & Utilities Corp. (NYSE: AQN)
Today’s penny stock pick is the utilities company, Algonquin Power & Utilities Corp. (NYSE: AQN).
Algonquin Power & Utilities Corp. operates in the power and utility industries in the United States, Canada, and other regions. The company operates through Regulated Services Group and Hydro Group segments. The company primarily owns and operates a portfolio of regulated electric, water distribution and wastewater collection, and natural gas utility systems and transmission operations.
As of December 31, 2024, it served approximately 1,265,000 customer connections in the electric (approximately 310,000 customer connections), water and wastewater (approximately 577,000 customer connections), and natural gas sectors (approximately 378,000 customer connections). The company’s regulated electrical distribution utility systems and related transmission and generation assets are located in the states of Arkansas, California, Kansas, Missouri, Nevada, New Hampshire, and Oklahoma, and in Bermuda. Its regulated water distribution and wastewater utility systems are located in the states of Arizona, Arkansas, California, Illinois, Missouri, New York, and Texas, and in Chile.
The company’s regulated natural gas distribution utility systems are located in the states of Georgia, Illinois, Iowa, Massachusetts, Missouri, New Hampshire, and New York, and in the province of New Brunswick. It also owns and operates generating assets with a gross capacity of approximately 2.0 gigawatt (GW) and has investments in generating assets with approximately 0.3 GW of net generation capacity.
The company generates and sells electrical energy, capacity, and renewable attributes produced by its portfolio of 14 hydroelectric power generation facilities located in the provinces of Alberta, Ontario, New Brunswick, and Quebec.
Website: https://algonquinpower.com/
Latest 10-k report: https://www.sec.gov/cgi-bin/viewer?action=view&cik=1174169&accession_number=0001174169-25-000020&xbrl_type=v
Analyst Consensus: As per TipRanks Analytics, based on 8 Wall Street analysts offering 12-month price targets for AQN in the last 3 months, the stock has an average price target of $5.41, which is nearly 11% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Corporate Insiders placed Informative Buys of Shares Worth $199.1K in the Last 3 Months.
Insiders | Source: TipRanks.com
- Hedge Funds Increased Holdings by 11.2M Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- An overall rise in energy demand.
- Possible interest rate cuts.
- Rumors of a buyout.
- The company is fundamentally safe, conservative, and well-run, pays a well-covered dividend, and has a realistic upside based on earnings growth or multiple expansions or reversions.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Downtrend Channel: The daily chart shows that the stock looks poised for a breakout from a downtrend channel, which is shown as purple color lines. This is a possible bullish indication.
AQN – Daily Chart
#2 Price above MA: The stock is currently above its 50-day SMA, indicating that the bulls have currently gained control.
#3 Bullish RSI: The RSI is above 50 and moving higher, indicating possible bullishness.
#4 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible 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.
AQN – Weekly Chart
#6 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 AQN is above the price of $5.00.
Target Prices: Our first target is $5.80. If it closes above that level, the second target price is $6.50.
Stop Loss: To limit risk, place a stop loss at $4.50. Note that the stop loss is on a closing basis.
Our target potential upside is 16% to 30%.
For a risk of $0.50, our first target reward is $0.80, and the second target reward is $1.50. 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.
AQN – Consolidated Statements and Net Losses
- The company has divested its renewable assets, turning it from a great renewable player with a good asset base and an impressive track record of integration, optimization and market leadership into a company in shift, with asset sales and structural changes.
- Potential for EPS decline due to the asset sales and the company restructuring.
- AQN’s peers in the regulated sector (like Enel) are undervalued, with better fundamentals, better yield, better upside, and better stability than the company.
- AQN’s dividend reinvestment plan (DRIP) has been suspended since March 16, 2023.
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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