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: Applied DNA Sciences Inc. (NASDAQ: APDN)
Today’s penny stock pick is the DNA-based technology solutions company, Applied DNA Sciences Inc. (NASDAQ: APDN).
Applied DNA Sciences Inc. develops and markets DNA-based technology solutions for use in the nucleic acid-based in vitro diagnostics and preclinical nucleic-acid based drug development and manufacturing markets; and for supply chain security, anti-counterfeiting, and anti-theft technology purposes.
The company’s supply chain security and product authentication solutions include SigNature molecular tags that provide forensic power and protection for various applications used to fortify brand protection efforts and strengthen supply chain security, as well as mark, track, and convict criminals; SigNify IF portable DNA readers and SigNify consumable reagent test kits that provide real-time authentication of molecular tags in the field; and CertainT, which indicates the use of tagging, testing, and tracking platforms and solutions enabling manufacturers, brands, and trade organizations to convey proof of their product claims.
It also manufactures and sells COVID-19 PCR-based molecular diagnostic test kit under the LineaTM COVID-19 Assay Kit trademark; and COVID-19 diagnostic test kit to prevent virus spread within a community, school, or workplace under the safeCircle trademark.
In addition, the company provides preclinical contract research and manufacturing services for the nucleic acid-based therapeutic markets; and contract research services to RNA based drug and biologic customers for preclinical studies. Further, it develops an invasive circulating tumor cell capture and identification technology that uses a patented functional assay to capture live invasive circulating tumor cell and associated lymphocytes.
Website: https://www.adnas.com
Latest 10-k report: https://sec.report/Document/0001410578-22-000063 (Amended), https://sec.report/Document/0001410578-21-000497/ (original)
Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for APDN in the last 3 months, the stock has an average price target of $7.00, which is nearly 230% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Applied DNA Sciences announced that it received its largest single purchase order for LinearDNA valued above the mid-six figures. This order was placed under a long-standing supply agreement for the bulk manufacture of LinearDNA for a global manufacturer of in vitro diagnostics. The company noted that it will deliver quantities of LinearDNA to the customer in the current quarter, with the full order expected to be fulfilled over the next three quarters.
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.
APDN – 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 is currently moving higher from below the +DI and -DI lines.
#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 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as a purple color dotted line. This is a possible bullish indication.
APDN – Weekly Chart
#6 Bullish RSI: The RSI is currently near 50 and moving higher, indicating possible bullishness.
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, 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 APDN is above the price of $2.40.
Target Prices: Our first target is $4.00. If it closes above that level, the second target price is $6.00.
Stop Loss: To limit risk, place a stop loss at $1.50. Note that the stop loss is on a closing basis.
Our target potential upside is 67% to 150%.
For a risk of $0.90, our first target reward is $1.60, and the second target reward is $3.60. 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 and incurred a net loss of $14,278,439 for the fiscal year that ended September 30, 2021. APDN has an accumulated deficit of $284,122,092 as of September 30, 2021.
APDN – Consolidated Statements of Operations
- The company was formerly known as Datalink Systems, Inc. and changed its name to Applied DNA Sciences, Inc. in 2002.
- The purchase order for LinearDNA is a contract renewal, not a new contract. Applied DNA doesn’t give an exact number for the order, though it notes that it’s in the mid-six-digit range.
- Despite being a loss-making company, the executives are being paid significant compensation.
APDN – Executive Compensation
- The company has customer concentration risk. As of September 30, 2021, two customers accounted for an aggregate of 67% of APDN’s total accounts receivable.
- APDN has significant competition from the likes of Precigen, Inc., Aldevron, LLC, Cobra Biologics, Limited, Integrated DNA Technologies, Inc., 4basebio PLC, Ziopharm Oncology, Inc., MaxCyte, Inc., Touchlight Genetics Ltd., Generation Bio, Co., Novartis AG, Kite Pharma, Inc. and Juno Therapeutics, Inc.
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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