Analysts Think This $3 Stock Has 50% Upside Potential

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: TMC the metals company Inc. (NASDAQ: TMC)

Today’s penny stock pick is the deep-sea minerals exploration company, TMC the metals company Inc. (NASDAQ: TMC).

TMC the metals company Inc. focuses on the collection, processing, and refining of polymetallic nodules found on the seafloor in California. It primarily explores nickel, cobalt, copper, and manganese products. The company holds exploration and commercial rights in three polymetallic nodule contract areas in the Clarion Clipperton Zone of the Pacific Ocean. Its products are used in electric vehicles (EV), renewable energy storage markets, EV wiring, energy transmission, manganese alloy production required for steel production, and other applications. The company was formerly known as Sustainable Opportunities Acquisition Corporation and changed its name to TMC the metals company Inc.

Website:  https://metals.co

Latest 10-k report:  https://investors.metals.co/static-files/fde372d9-45f6-4269-a7bf-801382f2e78d

Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for TMC in the last 3 months, the stock has an average price target of $4.25, which is nearly 50% upside from current levels.

Potential Catalysts / Reasons for the Hype:

• The Financial Times reported that U.S. President Donald Trump was considering an executive order enabling the stockpiling of deep-sea metals. This is viewed as a move by Washington to counter Chinese dominance in the crucial rare earth and minerals industries. China is currently one of the most dominant players in minerals, holding around 90% of the world’s rare earths.
• TMC had announced plans to apply for deep-sea exploration and commercial recovery permits under the U.S. mining code, aiming to leverage the U.S. regulatory framework for its operations.

On analyzing the company’s stock charts, there seem to be multiple bullish indications…

Bullish Indications

#1 Symmetrical Triangle Pattern Breakout: The daily chart shows that the stock has currently broken out a symmetrical triangle pattern with a high volume. This is marked as purple 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.

#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 currently 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 dotted line. This looks like a good area for the stock to move higher. The stock is also trading above its 50-week and 200-week SMA, indicating that the bulls are firmly in control.

#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 TMC is above the price of $2.90.

Target Prices: Our first target is $4.00. If it closes above that level, the second target price is $5.00.

Stop Loss: To limit risk, place a stop loss at $2.20. Note that the stop loss is on a closing basis.

Our target potential upside is 38% to 78%.

For a risk of $0.70, our first target reward is $1.10, and the second target reward is $2.10. 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:

1. The company has a history of net losses. TMC reported a net loss of $81.9 million for the year ended December 31, 2024, and $73.8 million in 2023.
   

   TMC – Consolidated Statements of Loss and Comprehensive Loss

2. In February 2022, TMC received letters from the SEC notifying of an investigation and requesting the voluntary production of documents and information regarding the company’s 2020 acquisition of Tonga Offshore Mining Limited from Deep Sea Mining Finance Ltd. and TMC’s Business Combination with SOAC.
3. Hedge Funds Decreased Holdings by 580.90K Shares Last Quarter.
   

   Hedge Funds | Source: TipRanks.com

4. The company has ongoing legal proceedings. These include Caper v. TMC The Metals Company Inc. F/K/A Sustainable Opportunities Acquisition Corp., Gerard Barron and Scott Leonard; Atalaya Special Purpose Investment Fund II LP et al. v. Sustainable Opportunities Acquisition Corp. n/k/a TMC The Metals Company Inc., Index No. 650449/2023; and Lin v. TMC The Metals Company Inc., Gerard Barron, and Craig Shesky.
5. Corporate Insiders placed Informative Sells of Shares Worth $598.5K in the Last 3 Months.
   

   Insiders | Source: TipRanks.com

6. The company’s exploration, collecting, processing, and refining activities are subject to extensive and costly environmental requirements. Any current and future laws, regulations, and permits may impose significant costs, liabilities, or obligations.
7. Despite being a loss-making company, the executives are being paid significant compensation.
   

   TMC – 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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