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: ImmunityBio, Inc. (NASDAQ: IBRX)
Today’s penny stock pick is the clinical-stage biotechnology company, ImmunityBio, Inc. (NASDAQ: IBRX).
ImmunityBio, Inc. engages in developing therapies and vaccines that complement, harness, and amplify the immune system to defeat cancers and infectious diseases in the United States and Europe. It offers immunotherapy and cell therapy platforms, including antibody cytokine fusion protein N-803, vaccine technologies, toll-like receptor activating adjuvants, natural killer cells, and damage-associated molecular patterns inducers.
The company also develops therapeutic agents, which are in Phase II or III clinical trials for the treatment of liquid and solid tumors, including bladder, pancreatic, and lung cancers, as well as pathogens such as SARS-CoV-2 and HIV. It has collaboration agreements with the National Cancer Institute and Amyris, Inc.; and license agreements with LadRx Corporation, GlobeImmune, Inc., Access to Advanced Health Institute, 3M Innovative Properties Company, Sanford Health, Shenzhen Beike Biotechnology Co. Ltd., Sorrento Therapeutics, Inc., and Viracta Therapeutics, Inc.
Website: https://immunitybio.com
Latest 10-k report: https://ir.immunitybio.com/node/9711/html
Analyst Consensus: Not Covered By Wall Street Analysts in the last 3 months.
Potential Catalysts / Reasons for the Hype:
- FDA has accepted for review ImmunityBio’s resubmission of its Biologics License Application (BLA) for N-803, a first-in-class IL-15 superagonist, plus Bacillus Calmette-Guérin for the treatment of BCG-unresponsive non-muscle-invasive bladder cancer carcinoma in situ with or without Ta or T1 disease, and considered it as a complete response to the FDA’s May 9, 2023 complete response letter.
- The company also has 13 programs in its pipeline, including six in phase 2 or later.
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.
IBRX – 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 MAs: The stock is currently above its 50-day SMA as well as 200-day SMA, indicating that the bulls have currently gained control.
#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#5 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 looks like a good area for the stock to move higher. The stock is also trading above its 50-week SMA, indicating that the bulls are gaining control.
IBRX – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, 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 IBRX is above the price of $3.10.
Target Prices: Our first target is $4.20. If it closes above that level, the second target price is $5.00.
Stop Loss: To limit risk, place a stop loss at $2.50. Note that the stop loss is on a closing basis.
Our target potential upside is 35% to 61%.
For a risk of $0.60, our first target reward is $1.10, and the second target reward is $1.90. 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 incurred net losses in each year since its inception and, as of December 31, 2022, had an accumulated deficit of $2.4 billion. The net losses were $416.6 million, $346.8 million, and $221.9 million for the years ended December 31, 2022, 2021, and 2020, respectively.
IBRX – Consolidated Statements of Operations
- The company has a history of legal proceedings.
- Sorrento Therapeutics, Inc., derivatively on behalf of NANTibody, filed an action in the Superior Court of California, Los Angeles County against the company’s subsidiary NantCell, Dr. Soon-Shiong, and Charles Kim. The action alleged that the defendants improperly caused NANTibody to acquire IgDraSol, Inc. from NantPharma, LLC, and sought to have the transaction undone and the purchase amount returned to NANTibody.
- For the Altor BioScience, LLC Litigation, the company committed to make a settlement payment of $5.0 million in cash.
- In 2019, following approval by the Board of Directors, IBRX entered into a settlement agreement with three stockholders of the company, each of whom had submitted a stockholder demand for the Board of Directors to take action to remedy purported harm to the company resulting from certain alleged wrongful conduct concerning, among other things, disclosures about Dr. Soon-Shiong’s compensation and a related-party lease agreement.
- Despite being a loss-making company, the executives are being paid significant compensation.
IBRX – Executive Compensation
- The company has significant debt. As of December 31, 2022, IBRX’s indebtedness totals $737.4 million, (consisting of related-party promissory notes and accrued and unpaid interest), held by entities affiliated with Dr. Soon-Shiong.
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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