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: Maxeon Solar Technologies, Ltd. (NASDAQ: MAXN)
Today’s penny stock pick is the solar panel manufacturer, Maxeon Solar Technologies, Ltd. (NASDAQ: MAXN).
Maxeon Solar Technologies, Ltd. designs, manufactures, markets, and sells solar panels and related solar system components worldwide. The company provides interdigitated back contact and shingled solar cells and panels under the SunPower brand. It offers its products to dealers, project developers, system integrators, distributors, resellers, and residential and small-scale commercial customers.
Website: https://www.maxeon.com
Latest 10-k report: https://corp.maxeon.com/static-files/3d6c4066-281c-469a-94fe-248d1f595be2
Analyst Consensus: As per TipRanks Analytics, based on 7 Wall Street analysts offering 12-month price targets for MAXN in the last 3 months, the stock has an average price target of $2.17, which is nearly 96% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company’s field testing showed that new Maxeon 7 IBC cells exhibit a 70% lower average temperature rise in partial shading compared to competing technologies, confirming the resilience of Maxeon Interdigitated Back Contact (IBC) panels.
- Unusual options trading activity was noted for MAXN. Stock traders acquired 53,841 call options on the stock last day. This represents an increase of approximately 336% compared to the average volume of 12,339 call options.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Falling Wedge Pattern: 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 and looks poised for a breakout. Once the stock breaks out of the falling wedge pattern, it could move higher.
MAXN – Daily Chart
#2 Bullish RSI: The RSI is currently moving higher after reaching oversold levels, indicating possible price reversal to higher levels.
#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 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.
MAXN – Weekly Chart
#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart as well, indicating possible bullishness.
#6 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 MAXN is above the price of $1.20.
Target Prices: Our first target is $1.90. If it closes above that level, the second target price is $2.50.
Stop Loss: To limit risk, place a stop loss at $0.80. Note that the stop loss is on a closing basis.
Our target potential upside is 58% to 108%.
For a risk of $0.40, our first target reward is $0.70, and the second target reward is $1.30. 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. In fiscal year 2023, the company reported a net loss of $275.7 million.
MAXN – Consolidated Statements of Operations
- The company is a party to various ongoing litigation matters and claims.
- Insiders placed informative sells of shares worth $33.7K recently.
Insiders | Source: TipRanks.com
- The solar industry faces competition from other renewable energy companies and non-renewable power industries, including nuclear energy and fossil fuels.
- Hedge Funds Decreased Holdings by 45.3K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company has pledged a substantial portion of its assets, including a significant portion of its intellectual property that it hold outside of the United States, as collateral to secure the 2027 Notes.
- The company has customer concentration risk. Four customers individually accounted for at least 10% of the company’s accounts receivable as of December 31, 2023. SunPower accounted for 18.3% and 26.7% of the company’s total revenue during fiscal year 2023 and 2022, respectively.
- Despite being a loss-making company, the executives are being paid significant compensation. For fiscal year 2023, MAXN paid and accrued compensation of approximately $6.7 million and granted 671,918 RSUs and 1,299,676 PSUs to its Executive Officers.
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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