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: XpresSpa Group Inc. (NASDAQ: XSPA)
Today’s penny stock pick is the health and wellness services company, XpresSpa Group Inc. (NASDAQ: XSPA).
XpresSpa Group Inc. provides spa services at airports. It operates in two segments, XpresSpa and XpresTest. The company offers spa services, including massage, and nail and skin care, as well as spa and travel products; and retail products.
XpresSpa Group, Inc., through its subsidiary XpresTest, Inc., operates wellness centers that provide COVID-19 screening and testing, and rapid testing services for other communicable diseases, such as influenza, mononucleosis and group A streptococcus, and seasonal flu vaccination services; and other medical diagnostic testing services under the XpresCheck brand.
Website: www.xpresspagroup.com
Latest 10-k report: https://sec.report/Document/0001558370-21-003840/
Analyst Consensus: As per TipRanks analytics, XSPA’s average price target is $3.50 based on 1 Wall Street analyst offering 12 month price targets in the last 3 months.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company reporting stronger-than-expected quarterly sales.
- C. Wainwright analyst Scott Buck reiterating buy rating for the stock.
Recent Analyst Ratings | Source: TipRanks.com
- Corporate Insiders buying shares worth $186.8K in the Last 3 Months.
- The news of the company’s Board of Directors authorizing a stock repurchase program for up to 15,000,000 shares of its outstanding common stock.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has currently broken out of a Symmetrical Triangle pattern. A symmetrical triangle is a continuation pattern and is characterized by two converging trendlines connecting a series of sequential peaks and troughs. This is marked on the daily chart as pink color lines. Once a stock breaks out from a symmetrical triangle pattern, it usually moves higher.
XSPA – 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 started to move higher from below the +DI and -DI lines.
#3 Price above MAs: The stock is currently above the 50-day as well as 200-day SMA, indicating that the bulls are currently in 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 Bullish RSI: The RSI is currently above 50 and moving higher. This indicates possible bullishness.
#6 Above Support Area: The weekly chart shows that the stock had bounced back higher after taking support at a long-term support level. This is marked as a green color dotted line. The stock is also trading above its 50-week SMA. All these are possible bullish signs.
XSPA – Weekly Chart
#7 Bullish Stoch: In the weekly chart, the %K line is above the %D line of the stochastic, 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 XSPA is above yesterday’s high, which translates to a price of $1.95.
Target Prices: Our target prices are $2.50 and $3.50.
Stop Loss: To limit risk, place a stop loss below $1.65. Note that the stop loss is on a closing basis.
Our target potential upside is 28% to 80%.
For a risk of $0.30, our first target reward is $0.55, and the second target reward is $1.55. This is a nearly 1:2 and 1:5 risk-reward trade.
In other words, this trade offers 2x to 5x more potential upside than downside.
Potential Risks / Red Flags:
- XSPA has continued to generate negative cash flows from operations, and incurred net losses.
XSPA – Annual Report – Net Loss
- The company was formerly known as FORM Holdings Corp., a diversified holding company, and changed its name to XpresSpa Group, Inc. in January 2018.
- XSPA has a history of doing a stock purchase program and then issuing new shares, followed by a reverse split and sell the new shares. This could happen again.
- Despite being a loss-making company, the compensation for company executives more than doubled during the past year.
XSPA – Executive Compensation
- The company has a history of past and ongoing legal proceedings, including, Binn et al v. FORM Holdings Corp. et al.; In re Chen et al., CV 15-1347 (E.D.N.Y.); Binn, et al. v. Bernstein et al.; Kainz v. FORM Holdings Corp. et al; Rodger Jenkins and Gregory Jones v. XpresSpa Group, Inc.; EFP Capital Solutions LLC settlement; and Kyle Collins v. Spa Products Import & Distribution Co., LLC et al.
- On May 23, 2018, Route1 Inc., Route1 Security Corporation and Group Mobile Int’l, LLC commenced a legal proceeding against the Company in the Ontario Superior Court of Justice.
- XSPA had terminated its partnership with its Airport Concession Disadvantaged Business Enterprise partner, Cordial Endeavor Concessions of Atlanta. Following this, a series of complaints were filed by Cordial. On November 22, 2019, a Mutual Release and Settlement Agreement and a Confidential Payment Agreement were executed by the applicable parties. XSPA had to make payment and still has some amounts due.
- On January 2, 2020, the company had received a deficiency letter from The Nasdaq Stock Market which indicated that XSPA was not in compliance with the minimum bid price requirement.
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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