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: SmartRent Inc. (NYSE: SMRT)
Today’s penny stock pick is the enterprise software company, SmartRent Inc. (NYSE: SMRT).
SmartRent Inc. provides an integrated smart home operating system to residential property owners and operators, homebuilders, institutional home buyers, developers, and residents in the United States. Its solution is designed to provide communities with visibility and control of their assets while delivering cost savings and additional revenue opportunities through all-in-one home control offerings for residents.
The company’s products and solutions include smart apartments and homes, access control for buildings, common areas, rental units, asset protection and monitoring, parking management, self-guided tours, and community and resident Wi-Fi. It also offers professional services to customers, which include training, installation, and support services.
Website: https://smartrent.com/
Latest 10-k report: https://sec.report/Document/0000950170-22-004604
Analyst Consensus: As per TipRanks Analytics, based on 7 Wall Street analysts offering 12-month price targets for SMRT in the last 3 months, the stock has an average price target of $6.84, which is nearly 38% upside from current levels.
Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Multiple analysts gave buy ratings for the stock during the past week.
Analysts | Source: TipRanks.com
- Corporate Insiders Bought Shares Worth $964.6K in the Last 3 Months.
Insiders | Source: TipRanks.com
- Hedge Funds Increased Holdings by 4.9M Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
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. It has typically taken support at the bottom of the wedge before bouncing back. The stock has currently broken out from the falling wedge pattern. Once the stock breaks out of the falling wedge pattern, it could move higher.
SMRT – Daily Chart
#2 Bullish RSI: The RSI is above 50 and moving higher, indicating possible bullishness.
#3 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved 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 Downtrend Broken: The weekly chart shows that the stock has currently broken out of the prevailing downtrend. This is a possible bullish indication.
SMRT – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.
#7 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 SMRT is above the price of $5.00.
Target Prices: Our first target is $6.50. If it closes above that level, the second target price is $7.50.
Stop Loss: To limit risk, place a stop loss at $3.10. Note that the stop loss is on a closing basis.
Our target potential upside is 30% to 50%.
For a risk of $0.90, our first target reward is $1.50, and the second target reward is $2.50. 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, including a net loss of $37.1 million for 2020 and $71.9 million for 2021.
SMRT – Consolidated Statements of Operations and Comprehensive Loss
- Despite being a loss-making company, the executives are being paid significant compensation.
SMRT – Executive Compensation
- According to the latest quarterly report, the company’s losses nearly tripled year-over-year.
SMRT -10Q – Consolidated Statements of Operations and Comprehensive Loss
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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