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: Virgin Galactic Holdings, Inc. (NYSE: SPCE)
Today’s penny stock pick is the aerospace and space travel company, Virgin Galactic Holdings, Inc. (NYSE: SPCE).
Virgin Galactic Holdings, Inc. focuses on the development, manufacture, and operation of spaceships and related technologies. The company engages in the design and development, manufacturing, ground and flight testing, spaceflight operation, and post-flight maintenance of spaceflight systems for private individuals, researchers, and government agencies.
Website: https://www.virgingalactic.com/
Latest 10-k report: https://d18rn0p25nwr6d.cloudfront.net/CIK-0001706946/12491ef3-77e7-4ff0-970a-9c3c04f54a45.pdf
Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for SPCE in the last 3 months, the stock has an average price target of $14.83, which is nearly 325% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The stock has a large amount of short interest, adding a potential element of short squeeze volatility given its popularity within the meme stock community.
- SPCE’s commercial flights are set to resume in 2026. Assembly of the spaceships in Phoenix is expected to commence in Q1 of 2025, with the rollout and testing of the first ship expected in the second half of 2025. Virgin Galactic is now in the process of moving to a new spaceship design (Delta Class ships) which will be capable of flying more frequently. The Delta ship is also larger and will transport 6 passengers instead of 4.
- Rumors of a potential buyout.
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.
SPCE – Daily Chart
#2 Oversold RSI: The RSI is starting to move higher from oversold levels, 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 Bullish Divergence: The weekly chart shows that there is a bullish divergence between RSI and price. While the price formed a lower low, the RSI formed a higher low. This is marked as pink dotted lines in the chart. A bullish divergence is usually the sign of a reversal and possible upmove in the near term.
SPCE – Weekly Chart
#5 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 SPCE is above the price of $3.65.
Target Prices: Our first target is $5.00. If it closes above that level, the second target price is $6.00.
Stop Loss: To limit risk, place a stop loss at $2.90. Note that the stop loss is on a closing basis.
Our target potential upside is 43% to 90%.
For a risk of $0.75, our first target reward is $1.35, and the second target reward is $2.35. 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. SPCE incurred net losses of $346.7 million and $502.3 million, for the years ended December 31, 2024, and 2023, respectively.
SPCE – Consolidated Statements of Operations
- The company has ongoing legal proceedings. This includes The Boeing Company and Aurora Flight Sciences Corporation v. the Company; Lavin v. the Company; Abughazaleh derivatively on behalf of the Company vs. Certain Current and Former Officers and Directors; Molnar and Tubbs derivatively on behalf of the Company vs. Certain Current and Former Officers and Directors; Espinosa derivatively on behalf of the Company vs. Certain Current and Former Officers and Directors; Gera derivatively on behalf of the Company vs. Certain Current and Former Officers and Directors; and Spiteri, Grenier, Laidlaw, and St. Jean derivatively on behalf of the Company vs. Certain Current and Former Officers and Directors.
- Hedge Funds Decreased Holdings by 2.9K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Even if SPCE can successfully complete the production of its first 2 Delta Class ships, its viability largely hinges on whether the VMS Eve mothership can fly at a much higher cadence.
- Despite being a loss-making company, the executives are being paid significant compensation.
SPCE – Executive Compensation
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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