Are Analysts Right About These Penny Stocks?
Penny stocks have become a go-to for many traders looking for high-risk, high-reward situations in the stock market. No matter what day it is or what broader markets are doing, you’ll likely find at least one of the stocks under $5 making a big move.
Some call them momentum stocks, others simply call them penny stocks. Regardless of your personal definition, there’s one, glaring thing the be aware of. That is the fact that penny stock can create very large gains in a very short period of time.
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In 2020, the big moves, in my opinion, have been magnified. Earlier today we talked about penny stocks on Robinhood. Why point out a specific broker? Well, the simple reason stems from the fact that the mobile-first broker attracted millions of new users this year. Many of these newbies hadn’t traded a share of stock in their lives. But a mix of stay at home orders and general lack of jobs created an entire army of traders.
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While other platforms like TD Ameritrade, ETrade, Schwab, and others also experienced user growth this year, it paled in comparison. Some of these traders learned the hard way that the market can hurt you if you’re unprepared or have no idea what you’re doing.
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Others found ways to consistently make money and penny stocks have become a large part of the strategy. Even traditional sports betters became day traders, chasing gains in lieu of a lack of professional sports.
Now, 8 months into the year, the blind hype has now turned into a more educated trader in many cases. With that, they are starting to pay attention to what analysts are saying. Should you go by what these firms say and not question it? No, I think even analysts can be wrong but it isn’t a bad item to put into your overall diligence strategy. Having said this, do you agree with these analysts?
Penny Stocks To Buy [according to analysts]: Gevo Inc.
Gevo Inc. (GEVO Stock Forecast) should be familiar to many of our readers. We started following its progress back at the start of July. The penny stock had just begun creeping up from hitting 52-week lows days prior. The renewable chemical and biofuel company has felt the pressure along with its sector this year. GEVO stock has dropped from over $2.40 in January to lows of $0.46 on July 1st. Most recently, however, the company has been in a much brighter spotlight.
Just a few weeks ago, Gevo entered into a binding Renewable Hydrocarbons Purchase and Sale Agreement with Trafigura Trading LLC. Trafigura is a wholly-owned subsidiary of Trafigura Group Pte Ltd. If you’re unfamiliar with the parent company, Trafigura Group is one of the world’s leading independent commodity trading companies. It holds over $171B and over $54B in revenue and assets, respectively.
The agreement is a long term, take or pay contract, and is the largest contract in Gevo’s history. Trafigura is expected to take delivery of 25MPGY of renewable hydrocarbons starting in 2023. the company said that, with this deal, it brings Gevo to over $1.5B of revenue in long term contracts when added to the other contracts in place.
Last week, Peak Value IP LLC completed a valuation of intellectual property for Gevo. The firm said that the company had a valuation of $412 million for its IP. On top of that, Gevo was also able to raise roughly $46 million, which put a slight dent in the penny stock. What do analysts think of the company? The most recent rating comes from H.C. Wainwright which gives a Buy rating and $5 price target.
Penny Stocks To Buy [according to analysts]: Acasti Pharma Inc.
Acasti Pharma Inc. (ACST Stock Forecast) is in an interesting situation. This could be a coin flip heading into Monday and a high-risk situation at that. So, before I get into the details, please be well-aware of this if ACST stock is on your list right now.
The “risk” has everything to do with upcoming results. In a business update from earlier this month, Acasti reported on several initiatives, the foremost being its TRILOGY 2 trial. This is for its prescription drug candidate CaPre®, a purified omega-3 phospholipid concentrate aimed at treating hypertriglyceridemia.
The company has remained blinded from the trials and is set to report findings “on or about” August 31, 2020. Considering this is Monday, the outcome of these results could dictate which direction ACST stock heads at the beginning of the week. Obviously, the company itself said “on or about” so we can’t be assured this data will be guaranteed to come out on Monday. However, it is something important to note especially considering its Phase 3 TRILOGY 1 data didn’t meet its primary endpoint, announced January 13th.
Aside from this, analysts seem to remain optimistic about the company. What do analysts think, specifically? The most recent rating comes from H.C. Wainwrights’s reiterated Buy on the penny stock. The firm also carries a $3 price target. Prior to this, B. Riley, Echelon Wealth Partners, and Oppenheimer all issued Buy ratings on ACST with varying price targets ranging from $1.40 to $7.
Penny Stocks To Buy [according to analysts]: Party City Holdco Inc.
Party City Holdco Inc. (PRTY Stock Forecast) has been one of the top penny stocks to watch for the last few quarters. Ever since reaching 52-week lows of $0.26 in March, PRTY stock has been in an uptrend. Friday saw shares reach highs of $2.91; a price not traded at since February. One of the key contributing factors that have aided Party City is its focus on evolving into a brick and click business. When we first began following PRTY stock more closely in May, the company had found itself actually benefiting from things like drive-by birthdays. What’s more, is that Party City has benefited from its stronger Q2 performance.
Earlier this month, Party City reported stronger than expected sales for the quarter. While it missed on EPS, the company highlighted several important topics. One of them being North American e-commerce sales. Amid the slew of brick and mortar businesses failing or going bankrupt this year, the ones that have weathered the storm the most have been able to deploy a brick and click approach. In line with this, Party City saw its e-commerce sales increase 83.2%.
On top of this, you’ll also see that insiders are scooping up shares of PRTY stock this month. Between August 7th and 25th, FORM 4s were filed showing significant insider buying. Clifford Sosin, for instance, purchased over 1.6 million shares during that period at average prices ranging from $1.6598 to $2.0174. He runs CAS Investment Partners, which has a reported market value as of Q2 just under $1 billion according to Whale Wisdom. Aside from Sosin, Norman Matthews, Party City’s Chairman, purchased 250,000 shares of PRTY stock at an average price of $2.
As far as analysts are concerned, overall, the average rating is technically a “Hold” right now. However, the most recent rating from Credit Suisse Group was “Outperform”. Will this remain the case as more states begin reopening or will analysts start changing the PRTY stock forecast before the end of the year?