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: Waitr Holdings Inc. (NASDAQ: WTRH)
Today’s penny stock pick is the online ordering technology platform, Waitr Holdings Inc. (NASDAQ: WTRH).
Waitr Holdings Inc. provides a restaurant platform for online food ordering and delivery services across the United States. The company’s Waitr and Bite Squad mobile applications provide delivery, carryout, and dine-in options, connecting restaurants, drivers, and diners. As of December 31, 2020, the company had approximately 20,000 restaurants, in 700 cities, on the platforms.
Website: www.waitrapp.com
Latest 10-k report: https://sec.report/Document/0001564590-21-011498/
Analyst Consensus: As per TipRanks Analytics, one Wall Street analyst is offering 12-month price targets for WTRH in the last 3 months. The average price target for WTRH is $1.80, which is a 30.43% Upside from current levels.
Source: TipRanks.com
Recent Analyst Ratings | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The news of the company’s partnership with Smoothie King. Waitr was picked by Smoothie King as a local delivery service partner.
- The company’s expansion into the weed delivery business.
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 purple 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 with very high volume, indicating possible bullishness.
WTRH – Daily Chart
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI and the ADX lines are above the -DI line, and the ADX line is moving higher from below the +DI and -DI lines.
#3 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.
#4 Bullish Aroon: The chart shows that the value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates possible bullishness.
#5 Above Support Area: The weekly chart shows that the stock is trading above a support area, which is marked as a pink color dotted line. This is a possible bullish indication.
WTRH – Weekly Chart
#6 Oversold RSI: The weekly chart shows that the RSI is moving higher from oversold levels. This typically points to an upcoming trend reversal.
#7 Bullish Stoch: In the weekly chart as well, the %K line of the stochastic is above the %D line. It is also moving higher from oversold levels. All these are positive indications.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for WTRH is if it closes above the near-term weekly resistance level. This translates to a price of above $1.59.
Target Prices: Our target prices are $2.50 and $3.50.
Stop Loss: To limit risk, place a stop loss at $1.08. Note that the stop loss is on a closing basis.
Our target potential upside is 57% to 120%.
For a risk of $0.51, our first target reward is $0.91, and the second target reward is $1.91. 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 a history of net losses.
WTRH – Annual Report – Net Loss
- As per the company’s latest quarterly report, despite having a revenue of $49 million, the company ended up with a loss of $5.6 million.
WTRH – Q2 Report – Net Loss
- In spite of being a loss-making company, the executives are being given huge compensation.
WTRH – Executive Compensation
- WTRH has multiple ongoing legal proceedings.
- In February 2019, the Company was named a defendant in a lawsuit titled Halley, et al vs. Waitr Holdings Inc. filed in the United States District Court for the Eastern District of Louisiana on behalf of plaintiff and similarly situated drivers alleging violations of the Fair Labor Standards Act (FLSA) and state and federal wage law, and in March 2019, the Company was named a defendant in a lawsuit titled Montgomery v. Waitr Holdings Inc. filed in the United States District Court for the Eastern District of Louisiana on behalf of plaintiff and similarly situated drivers, alleging violations of FLSA and Louisiana Wage Payment Act.
- In April 2019, the Company was named as a defendant in a class action complaint filed by certain current and former restaurant partners, captioned Bobby’s Country Cookin’, et al v. Waitr.
- In September 2019, Christopher Meaux, David Pringle, Jeff Yurecko, Tilman J. Fertitta, Richard Handler, Waitr Holdings Inc. f/k/a Landcadia Holdings Inc., Jefferies Financial Group, Inc. and Jefferies, LLC were named as defendants in a putative class action lawsuit entitled Walter Welch, Individually and on Behalf of all Others Similarly Situated vs. Christopher Meaux, David Pringle, Jeff Yurecko, Tilman J. Fertitta, Richard Handler, Waitr Holdings Inc. f/k/a Landcadia Holdings Inc., Jefferies Financial Group, Inc. and Jefferies, LLC. In the lawsuit, the plaintiff asserts putative class action claims alleging, inter alia, that various defendants made false and misleading statements in securities filings, engaged in fraud, and violated accounting and securities rules. A similar putative class action lawsuit, entitled Kelly Bates, Individually and on Behalf of all Others Similarly Situated vs. Christopher Meaux, David Pringle, Jeff Yurecko, Tilman J. Fertitta, Richard Handler, Waitr Holdings Inc. f/k/a Landcadia Holdings Inc., Jefferies Financial Group, Inc. and Jefferies, LLC, was filed in that same court in November 2019.
- Waitr is also involved in other litigation related to labor and employment claims, lawsuits and claims involving personal injuries, physical damage and workers’ compensation benefits suffered as a result of alleged conduct involving its employees, independent contractor drivers, and third-party negligence.
- The company operates in a highly saturated, low-margin market and has significant competition from the likes of DoorDash, GrubHub, and UberEats.
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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