We recently started a series called “Penny Stock of the Day”. These ideas are geared toward 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: 3D Systems Corporation (NYSE: DDD)
Today’s penny stock pick is the 3D printing and digital manufacturing solutions company, 3D Systems Corporation (NYSE: DDD).
3D Systems Corporation offers 3D printers technologies, such as stereolithography (SLA), selective laser sintering, direct metal printing, multi jet printing, color jet printing, polymer extrusion, and extrusion and SLA based bioprinting that transform digital data input generated by 3D design software, computer aided design (CAD) software, or other 3D design tools into printed parts.
It also develops, blends, and markets various print materials, such as plastic, nylon, metal, composite, elastomeric, wax, polymeric dental materials, and biocompatible materials. In addition, the company provides digital design tools, including software, scanners, and haptic devices, as well as solutions for product design, simulation, mold and die design, 3D scan-to-print, reverse engineering, production machining, metrology, and inspection and manufacturing workflows under the Geomagic brand.
Further, it offers 3D Sprint and 3DXpert, a proprietary software to prepare and optimize CAD data and manage the additive manufacturing processes FOR automated support building and placement, build platform management, print simulation, and print queue management. Additionally, the company provides maintenance and training services; and precision healthcare solutions, such as design, planning, modeling, prototyping, manufacturing, printing, and finishing of medical and dental devices, anatomical models, and surgical guides and tools.
It primarily serves companies and small and midsize businesses in medical, dental, automotive, aerospace, durable goods, government, defense, technology, jewelry, electronic, education, consumer goods, energy, biotechnology, and other industries through direct sales force, channel partners, and appointed distributors.
Website: https://www.3dsystems.com/
Latest 10-k report: https://d18rn0p25nwr6d.cloudfront.net/CIK-0000910638/c3f7bc99-d28c-40e4-9cce-904561c9da2d.pdf
Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analysts offering 12-month price targets for DDD in the last 3 months, the stock has an average rating of Moderate Buy.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company recently announced a deal with Daimler Trucks and Buses to improve the production of spare parts using additive manufacturing. Through this partnership, Daimler will use 3D Systems’ expertise in additive manufacturing to produce hard-to-find components like fuse box covers.
- Hedge Funds Increased Holdings by 998.0K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- The company’s collaboration with Sauber Motorsports highlights potential growth avenues in automotive applications.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Symmetrical Triangle Pattern: The daily chart shows that the stock has currently formed a symmetrical triangle pattern, which is marked as purple color lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper trend line occurs, it usually signifies the start of a new bullish trend.
DDD – 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 as well as 200-day SMA, indicating that the bulls have gained control.
#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 pink color dotted line. This is a possible bullish indication. The stock is also trading above its 50-week SMA, indicating that the bulls are gaining control.
DDD – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, 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 DDD is above the price of $4.10.
Target Prices: Our first target is $6.00. If it closes above that level, the second target price is $7.00.
Stop Loss: To limit risk, place a stop loss at $3.10. Note that the stop loss is on a closing basis.
Our target potential upside is 46% to 71%.
For a risk of $1.00, our first target reward is $1.90, and the second target reward is $2.90. 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 a history of net losses.
DDD – Consolidated Statements of Operations
- The Company and certain of its current and former executive officers have been named as defendants in a consolidated putative stockholder class action lawsuit pending in the United States District Court for the Eastern District of New York. The action is styled In re 3D Systems Securities Litigation, No. 1:21-cv-01920-NGG-TAM (E.D.N.Y.)
- Corporate Insiders placed Informative Sells of Shares Worth $216.6K in the Last 3 Months.
Insiders | Source: TipRanks.com
- The company has customer concentration risk. For the years ended December 31, 2023, 2022, and 2021, a large customer represented approximately 15%, 23%, and 22% of the company’s consolidated revenue.
- Despite being a loss-making company, the executives are being paid significant compensation.
DDD – Executive Compensation
- The company had delayed filing of the Form 10-K and the Form 10-Q for the quarter ended March 31, 2024. This may lead to further investigation and scrutiny by the SEC, which has been conducting a formal investigation of the Company since April 2022.
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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