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: Buzzfeed Inc. (NASDAQ: BZFD)
Today’s penny stock pick is the Internet media, news, and entertainment company, Buzzfeed Inc. (NASDAQ: BZFD).
Buzzfeed Inc. provides breaking news, original reporting, entertainment, and videos across the social Web to its global audience. It also provides cross-platform network such as BuzzFeed Originals, which creates articles, lists, quizzes, and videos; BuzzFeed Media, comprises a portfolio of identity-driven lifestyle brands that include Nifty, Goodful, As/Is, and Tasty; BuzzFeed Studios, that produces original content across broadcast, cable, film, and digital platforms; BuzzFeed News, which includes reporting and investigative journalism; and BuzzFeed Commerce, which develops social commerce products and experiences, licensing, and other strategic partnerships.
Website: https://www.buzzfeed.com
Latest 10-k report: https://investors.buzzfeed.com/node/6611/html
Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for BZFD in the last 3 months, the stock has an average price target of $7.25, which is nearly 63% upside from current levels.
Source: TipRanks.com
Analyst Forecasts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The investment company SOA Wealth Advisors, LLC. initiated a position in BZFD in January.
- Hedge Funds Increased Holdings by 627.3K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company’s recent acquisition of Complex Networks, a global youth entertainment company.
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 has been forming a falling wedge pattern for the past several months. These are marked as purple color lines. The stock has currently broken out from the falling wedge pattern. Once a stock breaks out of the falling wedge pattern, it typically moves higher.
BZFD – Daily Chart
#2 Bullish RSI: The RSI is currently moving higher from oversold levels, 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 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 Doji: The latest candle in the weekly chart is a doji, indicating that a reversal may be imminent. This is marked as a pink color ellipse.
BZFD – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, and is also starting to move higher from oversold levels, indicating possible bullishness.
#7 Oversold RSI: The RSI is currently near oversold levels in the weekly chart, indicating that a reversal may be imminent.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for BZFD is above the price of $4.65.
Target Prices: Our first target is $5.50. If it closes above that level, the second target price is $6.20.
Stop Loss: To limit risk, place a stop loss below $4.20. Note that the stop loss is on a closing basis.
Our target potential upside is 18% to 33%.
For a risk of $0.45, our first target reward is $0.85, and the second target reward is $1.55. 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 neither engaged in any operations nor generated any revenues to date. For the period from September 9, 2020 (inception) to December 31, 2020 the company had a net loss of approximately $11,000.
- BuzzFeed had debuted on Dec. 6 after merging with blank-check company 890 5th Avenue Partners Inc. However, the stock had plunged as the majority of investors opted not to participate, leaving the business with a fraction of the millions in funding it originally expected to receive. Although the speed and depth of the decline in BuzzFeed’s stock were mainly attributed to the small number of shares available to trade, investors pulling out does seem like a major red flag.
- The company had raised $150M worth of convertible notes with an exercise share price of $12.5.
- The company had a net loss of $3,674,779 for the Nine Months Ended on September 30, 2021.
BZFD – Consolidated Statements of Operations – Latest 10Q
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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