We recently started a series called “Penny Stock of the Day”. These ideas are geared for 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: Infinity Pharmaceuticals Inc. (NASDAQ: INFI)
Today’s penny stock pick is the biopharmaceutical company, Infinity Pharmaceuticals Inc. (NASDAQ: INFI).
Infinity Pharmaceuticals Inc. focuses on developing novel medicines for people with cancer. The company’s developed products and those under development include therapies targeting hematologic malignancies, or blood cancers; refractory indolent non-Hodgkin lymphoma; refractory chronic lymphocytic leukemia; and solid tumors, including melanoma and non-small cell lung cancer.
Its product candidate is IPI-549 (eganelisib), an orally administered clinical-stage immuno-oncology product candidate that inhibits the enzyme phosphoinositide-3-kinase-gamma, which is in Phase 1/1b clinical trials for the treatment of triple negative breast cancer, solid tumors, and ovarian cancer.
The company has strategic alliances with Intellikine, Inc. to discover, develop, and commercialize pharmaceutical products targeting the delta and/or gamma isoforms of PI3K; Verastem, Inc. to research, develop, commercialize, and manufacture duvelisib and products containing duvelisib; and PellePharm, Inc. to develop and commercialize rights to its hedgehog inhibitor program, IPI-926, a clinical-stage product candidate, as well as collaboration agreements with Arcus Biosciences, Inc., F. Hoffmann-La Roche Ltd., and Bristol Myers Squibb Company.
Website: www.infi.com
Latest 10-k report: https://sec.report/Document/0001113148-21-000007/infi-20201231.htm
Analyst Consensus: Based on 6 Wall Street analysts offering 12-month price targets for Infinity Pharma in the last 3 months, the stock has an average price target of $7.75. This is a nearly 158.33% Upside from the last close of $3.00.
Potential Catalysts / Reasons for the Hype:
- ‘Buy’ rating was given to Infinity Pharma in the past 3 months by 6 analysts. Most recently, JPMorgan analyst Anupam Rama upgraded Infinity Pharmaceuticals to Overweight from Neutral with a $6 price target.
INFI – Analyst Ratings and Price Targets
- The hedge fund, Consonance Capital buying the stock. The value reported is now $21,237,250, translating to 2.26% of the portfolio.
- Promising data from Phase 2 MARIO-275 Trial in Urothelial Cancer (UC) and Phase 2 MARIO-3 Trial in Triple Negative Breast Cancer (TNBC). This further increases the possibility of FDA approval. FDA had already granted fast track designation for Eganelisib.
- Projected sales for the drug are twice the current market capitalization.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Falling Wedge Pattern Breakout: The daily chart shows that the stock was forming a falling wedge pattern for the past several weeks. These are marked as blue color lines. It has typically taken support at the bottom of the wedge before bouncing back. The stock has currently broken out of the falling wedge pattern, indicating possible bullishness.
INFI – 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 has moved higher from below the +DI and -DI lines.
#3 Price above MAs: The stock is currently above both 50-day as well as 200-day SMA, indicating that the bulls have currently gained control.
#4 Bullish RSI: The RSI is above 50 and moving higher, indicating possible bullishness.
#5 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.
#6 Fibonacci Support: Usually, after an up-move, stocks retrace to any of the key Fibonacci levels before surging back again. The stock had taken support at the 23.60% Fibonacci support level of the upmove before moving higher, as seen in the weekly chart. The stock is also currently trading above its 50-week as well as 200-week SMA. All these are possible bullish signs.
INFI – Weekly Chart
#7 Bullish RSI: The RSI is currently above 50 and moving higher in the weekly chart. This is a possible bullish sign.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for INFI is above the price of $3.05.
Target Prices: Our target prices are $4.00 and $5.00.
Stop Loss: To limit risk, place a stop loss at $2.50. Note that the stop loss is on a closing basis.
Our target potential upside is 31% to 64%.
For a risk of $0.55, our first target reward is $0.95, and the second target reward is $1.95. This is a nearly 1:2 and 1:4 risk-reward trade.
In other words, this trade offers 2x to 4x more potential upside than downside.
Potential Risks / Red Flags:
- The company has incurred operating losses since its inception. INFI’s net loss was $40.5 million and $47.1 million for the years ended December 31, 2020, and 2019, respectively. As of December 31, 2020, the company has an accumulated deficit of $766.3 million.
INFI – Annual Report – Consolidated Statements of Operations and Comprehensive Loss
- Although the company’s experimental cancer drug is said to nearly double the overall survival from 7.9 months to over 15 months, the company has not included the statistics (P-values). There is also the absence of a registration-enabling study.
- The company filed on July 27th to sell about 32 million shares of stock at the market price of $2.30 at the time of the announcement. They are looking to raise $75 million from the sale.
- The biotech has a history of failed drugs. The company’s previous lead P13K drug, duvelisib, was abandoned after showing a 46% response rate in non-Hodgkin lymphoma. The company had also reported clinical failures for two other molecules in 2009 and 2012.
- Despite being a loss-making company, the company executives are drawing significant compensation.
INFI – Executive Compensation
- The company was issued a deficiency letter from the Listing Qualifications Department of the Nasdaq Stock Market, LLC, On July 1, 2020. The notice was for the company not maintaining the Minimum Bid Price required for continued listing on the Nasdaq Global Select Market under Nasdaq Listing Rule 5450(a)(1).
- The company had reported net loss of $11,269,000 for the quarter ending June 30, 2021.
INFI – Quarterly Results
- The company is heavily dependent on the success of eganelisib. If INFI is unable to complete the clinical development of, obtain marketing approval for or successfully commercialize eganelisib, either alone or with a collaborator, or if we experience significant delays in doing so, their business could be substantially harmed.
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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