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: Minerva Surgical, Inc. (NASDAQ: UTRS)
Today’s penny stock pick is the commercial-stage medical technology company, Minerva Surgical, Inc. (NASDAQ: UTRS).
Minerva Surgical, Inc. develops, manufactures, and commercializes minimally invasive solutions to meet the uterine healthcare needs of women in the United States.
The company offers Minerva ES Endometrial Ablation System and Genesys HTA Endometrial Ablation System, which are endometrial ablation devices; Symphion Tissue Removal System, a minimally invasive uterine tissue removal system to combine bladeless tissue resection and coagulation, continuous visualization, and intrauterine pressure monitoring; and Resectr Tissue Resection Device, a handheld surgical instrument to enable the hysteroscopic removal and diagnosis of endometrial polyps.
Its devices are utilized by obstetrician-gynecologists in various medical treatment settings, including hospitals, ambulatory surgical centers, and physician offices.
Website: https://minervasurgical.com
Latest 10-k report: https://ir.minervasurgical.com/sec-filings/sec-filing/10-k/0000950170-22-004333
Analyst Consensus: Not Covered By Wall Street Analysts.
Potential Catalysts / Reasons for the Hype:
- News that Accelmed, a private equity firm focused on acquiring health technology companies, is taking a controlling stake in the company. The company entered into a share purchase agreement for the sale of 146,627,565 shares of its common stock in a private placement, led by Accelmed, with participation by New Enterprise Associates, at an offering price of $0.2046 per share. Gross proceeds of the private placement are expected to be approximately $30 million.
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.
UTRS – 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 Price above MA: The stock is currently above its 50-day SMA, indicating that the bulls have currently gained control.
#4 Bullish Stoch: The %K line of the stochastic is above the %D line, and has also moved higher from oversold levels, indicating possible bullishness.
#5 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.
#6 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as a pink color dotted line. This is a possible bullish indication.
UTRS – Weekly Chart
#7 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.
#8 MACD above Signal Line: In the weekly chart as well, 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 UTRS is above the price of $0.42.
Target Prices: Our first target is $0.75. If it closes above that level, the second target price is $1.00.
Stop Loss: To limit risk, place a stop loss at $0.22. Note that the stop loss is on a closing basis.
Our target potential upside is 78% to 138%.
For a risk of $0.20, our first target reward is $0.33, and the second target reward is $0.58. 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. UTRS’s net loss was $21.5 million for the year ended December 31, 2021, and $18.3 million for the year ended December 31, 2020. As of December 31, 2021, the company had an accumulated deficit of $249.6 million.
UTRS – Consolidated Statements Of Operations
- On December 28, 2022, Minerva Surgical, Inc. received written notice from the Listing Qualifications Department of The Nasdaq Stock Market indicating that the Company is not in compliance with the minimum Market Value of Publicly Held Shares of $5,000,000 under the Nasdaq Listing Rules.
- Despite being a loss-making company, the executives are being paid millions as compensation.
UTRS – Executive Compensation
- The company is currently involved in a patent infringement lawsuit with Hologic, Inc. In November 2015, Hologic and Cytyc Surgical (collectively, Hologic), filed suit against the company in the U.S. District Court for the District of Delaware alleging infringement of four patents and asserting various other claims including unfair competition, deceptive trade practices, and tortious interference with business relationships. UTRS has already posted a bond of approximately $7.2 million and is expected to incur significant litigation expenses going forward.
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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