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: Spruce Power Holding Corporation (NYSE: SPRU)
Today’s penny stock pick is the owner and operator of distributed solar energy assets, Spruce Power Holding Corporation (NYSE: SPRU).
Spruce Power Holding Corporation owns and operates distributed solar energy assets in the United States. The company offers electricity for homeowners and businesses through subscription-based payments and solar renewable energy credits (SRECs) for contracted prices, which are generated by home solar energy systems.
It also provides Spruce Pro servicing platform, which provides home and third party-owned solar energy systems with portfolio managed services, including billing and collections/asset recovery, account support services, financial asset management, homeowner support and servicing technology, asset operations, and transaction and execution services related to SRECs; and Spruce Pro, which offers third-party owners a range of services for residential, commercial, and industrial assets.
Website: https://www.sprucepower.com/
Latest 10-K report: https://s201.q4cdn.com/718822473/files/doc_financials/2024/SPRU-2024-12-31-10K.pdf
Analyst Consensus: Not covered by Wall Street analysts.
Potential Catalysts / Reasons for the Hype:
- The company’s streamlined operations are expected to save $20M annually, accelerating profitability and positive cash flow.
- SPRU’s new deals include a multi-year SREC (Solar Renewable Energy Credits) agreement worth $10M through 2029, backup servicing with Sunvida, and solar development with EnerWealth.
- The company’s expansion into home battery storage via Treehouse partnership adds diversification.
- SPRU’s $50M authorization signals confidence in undervaluation. There are also rumors of more M&A or partnerships.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Trend Channel Breakout: The daily chart shows that the stock has broken out of an uptrend channel, which is shown as purple color lines. This is a possible bullish indication.
SPRU – 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.
SPRU – Weekly Chart
#6 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#8 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 SPRU is above the price of $5.00.
Target Prices: Our first target is $7.10. If it closes above that level, the second target price is $9.00.
Stop Loss: To limit risk, place a stop loss at $3.70. Note that the stop loss is on a closing basis.
Our target potential upside is 42% to 80%.
For a risk of $1.30, our first target reward is $2.10, and the second target reward is $4.00. 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. SPRU incurred net losses of $70.5 million and $65.8 million for the years ended December 31, 2024 and 2023, respectively.
SPRU – Consolidated Statements of Operations
- Solar sector faces policy uncertainties, subsidies fluctuations, and competition in a restructuring market.
- Hedge Funds Decreased Holdings by 13.5L Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The solar energy industry is highly competitive and continually evolving as participants strive to distinguish themselves within their markets and compete with large utilities. SPRU faces competition from established utilities that supply energy to customers by traditional means.
- Despite being a loss-making company, the executives are being paid significant compensation.
SPRU – Executive Compensation
- The company has significant debt. As of December 31, 2024, the company has $730.6 million of long-term debt outstanding which are secured by its solar assets, and the majority of which is variable rate debt.
- As of March 8, 2021, two putative class action complaints were filed in the federal district court for the Southern District of New York against the company and certain of its current officers and directors.
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.
The DOGE Shock: Nine Stocks to Buy [sponsor]They say that DOGE's real agenda could shock the entire stock market in the coming days - sending a handful of widely unknown stocks soaring. And they've compiled the definitive investment playbook for anyone who wants the opportunity to capitalize. More here...