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: Heron Therapeutics, Inc. (NASDAQ: HRTX)
Today’s penny stock pick is the biotechnology company, Heron Therapeutics, Inc. (NASDAQ: HRTX).
Heron Therapeutics, Inc. engages in developing treatments to address unmet patient needs. The company’s product candidates utilize its proprietary Biochronomer, a drug delivery technology, which delivers therapeutic levels of a range of short-acting pharmacological agents over a period from days to weeks with a single administration.
It offers SUSTOL (granisetron), an extended-release injection for the prevention of acute and delayed nausea and vomiting associated with moderately emetogenic chemotherapy, or anthracycline and cyclophosphamide combination chemotherapy regimens; and CINVANTI, an intravenous formulation of aprepitant, a substance P/neurokinin-1 receptor antagonist for the prevention of acute and delayed nausea and vomiting associated with highly emetogenic cancer chemotherapy, as well as nausea and vomiting associated with moderately emetogenic cancer chemotherapy.
The company is also developing ZYNRELEF, a dual-acting local anesthetic that delivers a fixed-dose combination of the local anesthetic bupivacaine and a low dose of the nonsteroidal anti-inflammatory drug meloxicam; HTX-019, an investigational agent for the prevention of postoperative nausea and vomiting; and HTX-034 for postoperative pain management, as well as is in Phase Ib/II clinical study in patients undergoing bunionectomy.
Website: https://www.herontx.com
Latest 10-k report: https://herontherapeutics.gcs-web.com/static-files/9d68894a-586e-43d9-abae-548147def7e8
Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for HRTX in the last 3 months, the stock has an average price target of $6.50, which is nearly 237% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The 2024 sales for the company’s injectable antiemetic CINVANTI were reported to be over $100 million. ZYNRELEF, the company’s post-op pain therapy, reached record revenues of $8.5 million in Q4.
- HRTX reported a total net revenue of $144.2 million for the year ended December 31, 2024, up 14% from the prior year. The company reached profitability in Q4 with $3.6 million in net income, a significant improvement from a $10.7 million loss in Q4 2023.
- The company secured patent protection for CINVANTI until 2035. The U.S. District Court ruled in the company’s favor in a patent dispute with Fresenius Kabi USA, LLC.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Symmetrical Triangle Pattern: The daily chart shows that the stock is currently forming 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.
HRTX – Daily Chart
#2 Bullish RSI: The RSI is nearing 50 and moving higher, indicating possible bullishness.
#3 Bullish Stoch: The %K line of the stochastic is above the %D line, and is also moving higher from oversold levels, indicating possible bullishness.
#4 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.
HRTX – Weekly Chart
#5 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 HRTX is above the price of $2.10.
Target Prices: Our first target is $3.20. If it closes above that level, the second target price is $4.00.
Stop Loss: To limit risk, place a stop loss at $1.50. Note that the stop loss is on a closing basis.
Our target potential upside is 52% to 91%.
For a risk of $0.60, our first target reward is $1.10, and the second target reward is $1.90. 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. HRTX’s net losses for the year ended December 31, 2024, was $13.6 million.
HRTX – Consolidated Statements of Operations
- The company has a history of litigations related to patent infringements, with Slayback Pharma LLC, Mylan Pharmaceuticals Inc., and Fresenius Kabi.
- Hedge Funds Decreased Holdings by 15.3K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company faces intense competition from other companies developing products for the management of postoperative pain or the prevention of CINV and PONV, including lower-cost generic products, which may limit the company’s ability to sell its products.
- Despite being a loss-making company, the executives are being paid significant compensation.
HRTX – 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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