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: Innoviz Technologies Ltd. (NASDAQ: INVZ)
Today’s penny stock pick is the LiDAR sensor manufacturer, Innoviz Technologies Ltd. (NASDAQ: INVZ).
Innoviz Technologies Ltd. manufactures and sells automotive grade LiDAR sensors and perception software to enable safe autonomous driving at a mass scale. The company offers InnovizOne, a solid-state LiDAR sensor designed for automakers and robotaxis, shuttles, trucks, and delivery companies requiring an automotive-grade and mass-producible solution to achieve autonomy.
It also provides InnovizTwo, an automotive-grade LiDAR sensor that offers a solution for all levels of autonomous driving, as well as an option to integrate the perception application in the LiDAR sensor; and perception application, a software application that raw point cloud data from Innoviz LiDAR products into perception outputs. The company operates in Europe, Asia Pacific, the Middle East, Africa, and North America.
Website: https://www.innoviz.tech
Latest 10-k report: https://ir.innoviz.tech/sec-filings/all-sec-filings/content/0001178913-24-000910/0001178913-24-000910.pdf
Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for INVZ in the last 3 months, the stock has an average price target of $2.00, which is nearly 253% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- Innoviz is anticipating its Q2 2024 revenues to be in the range of $4 million to $5 million, with full-year revenue expected to be stronger in the latter half. The company has also set targets to secure two to three additional programs and $17 million to $20 million in new non-recurring engineering (NRE) bookings for 2024.
- Wall Street analysts are also majorly in agreement about the company’s ability to report better than expected earnings. Analysts have revised their earnings upwards for INVZ, suggesting some optimism about the company’s future performance.
- The company’s liquid assets exceed its short-term obligations, indicating a level of financial stability in the near term.
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 before bouncing back. The stock currently looks poised for a breakout from the falling wedge pattern. Once the stock breaks out of the falling wedge pattern, it could move higher.
INVZ – Daily Chart
#2 Oversold RSI: The RSI is currently near oversold levels and is now moving higher, indicating a possible reversal.
#3 Bullish Stoch: The %K line of the stochastic is above the %D line, and is also moving 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.
INVZ – 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 Bullish Divergence: The weekly chart shows a bullish divergence. A bullish divergence forms when the price makes a lower low, but the Stochastic Oscillator forms a higher low. This indicates less downward momentum that could foreshadow a bullish reversal.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for INVZ is above the price of $0.63.
Target Prices: Our first target is $1.00. If it closes above that level, the second target price is $1.30.
Stop Loss: To limit risk, place a stop loss at $0.42. Note that the stop loss is on a closing basis.
Our target potential upside is 59% to 106%.
For a risk of $0.21, our first target reward is $0.37, and the second target reward is $0.67. 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.
INVZ – Consolidated Statements of Operations
- The company has been notified by Nasdaq that it no longer meets the minimum bid price requirement but has been granted a 180-day grace period to regain compliance.
- Hedge Funds Decreased Holdings by 231.6K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company may need additional capital in the future in order to fund its growth strategy or to respond to technological advancements, competitive dynamics or technologies, customer demands, business opportunities, challenges, acquisitions or unforeseen circumstances. If it cannot raise additional funds when needed, its business, prospects, financial condition and operating results could be negatively affected.
- The company operates in a highly competitive market against a large number of both established competitors and new market entrants, and some market participants have substantially greater resources than INVZ.
- Sales to international customers accounted for approximately 99.6%, 98% ,and 99% of INVZ’s revenue in the years ended December 31, 2023, 2022, and 2021, respectively. The sales and operations in international markets expose the company to operational, financial and regulatory risks.
- The political, economic, and military conditions in Israel and the surrounding region may directly affect the company’s business and operations. Most of the company’s employees, including certain management members, operate from the offices located in Rosh HaAin, Israel.
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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