Whether you subscribe to the idea that penny stocks are always a buy or determine your strategy based on broader market conditions, chances are that cheap stocks are on your watch list. While these sweeping market trends might not influence low-priced equities, it’s important to understand what’s going on in the stock market today. It can help you determine areas of strength and weakness to understand where sympathy sentiment might be impacting certain trends.
Stock Market Today
Stocks declined on Monday as investors awaited several major economic reports this week. These could provide insights into the health of the job market and give clues about future interest rate policy decisions by the Federal Reserve. Coming off a strong November performance, Wall Street is cautiously optimistic that easing inflation could allow the Fed to stop raising rates soon and perhaps even begin cutting them in 2024.
Jobs, Jobs, Jobs
The monthly jobs report on Friday will be closely watched. Analysts predict employers added 175,000 jobs in November while the unemployment rate remained at 3.9%, indicating continued labor market strength. Other reports this week cover job openings, unemployment claims, and the services sector, which comprises most jobs in the US. Strong economic data could signal it’s not yet time for the Fed to pivot on rates.
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The Fed has aggressively raised rates this year to fight high inflation, slowing the entire economy in the process. But inflation has steadily declined from mid-2022 highs as interest rates moved to their highest levels in over 20 years. At their last meeting in early November, the Fed held rates steady, pausing the rapid pace of increases.
Rate Hike Outlook
Investors now expect rates to remain unchanged when the Fed meets in two weeks on December 13th. Futures trading indicates Wall Street believes the Fed could start cutting interest rates back down in early 2024 to stimulate the economy. For now, investors are parsing economic data for signals on the appropriate level of rates given employment and inflation trends.
Monday’s slip in stocks suggests a cautious mood on Wall Street. Despite hopes that the Fed may stop raising rates soon, there are still risks of recession if the economy slows too much or if inflation rebounds and the Fed resumes hiking rates. Key reports this week, especially Friday’s November jobs numbers, will provide important clues on the health of the labor market and future rate moves.
Penny Stocks to Buy? 4 To Watch
- Stem Inc. (NYSE: STEM)
- Senseonics (NYSEAMERICAN: SENS)
- Agile Therapeutics (NASDAQ: AGRX)
- SoundHound AI Inc. (NASDAQ: SOUN)
1. Stem Inc. (STEM)
The company and SB Energy, two players in the clean energy sector, recently announced a significant alliance. Stem specializes in AI-driven clean energy solutions and services. SB Energy, on the other hand, is a U.S. developer, owner, and operator of utility-scale solar and energy storage assets. Their collaboration is set to leverage Stem’s AI software and SB Energy’s Digital Platform to enhance utility-scale renewables management.
As part of this venture, Stem will become the preferred partner for SB Energy’s energy management system (EMS) for a significant portion of its energy storage pipeline in North America. From a bullish perspective, this alliance could be seen as a strong move towards solidifying Stem’s position in the clean energy market. On the bearish side, the integration of complex technologies and scaling up operations could pose challenges, potentially affecting the short-term performance of the company.
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The headlines broke shortly before Stem was awarded the 2023 New Product Innovation Award by Frost & Sullivan in the North American energy asset performance optimization industry. Stem’s Chief Technology Officer, Larsh Johnson, highlighted this focus on innovation that permeates every aspect of their business, aiming to provide solutions for owners, developers, traders, and operators across the entire energy asset lifecycle. Additionally, Frost & Sullivan anticipates significant growth in the global battery energy storage market, projecting it to reach $72 billion by 2030.
2. Senseonics (SENS)
Senseonics is a medical technology company specializing in the development and manufacturing of long-term, implantable continuous glucose monitoring (CGM) systems for diabetes management. Their products, including Eversense®, Eversense® XL, and Eversense® E3, are designed to offer innovative glucose management solutions to the global diabetes community.
Shares have been on the move since the company reported earnings in November. Senseonics reported its financial results for the third quarter of 2023, along with significant developments. The company generated $6.1 million in revenue for the quarter, an increase from $4.6 million in the same period in 2022. U.S. revenue rose to $3.9 million, up from $1.9 million in the previous year. However, international revenue slightly decreased to $2.2 million from $2.7 million. For the full year 2023, Senseonics expects global net revenue to be around the midpoint of the $20 million to $24 million range.
Senseonics also announced the completion of the last patient in the ENHANCE Pivotal Clinical Study’s adult cohort. They launched a direct-to-consumer U.S. advertising campaign titled ‘The CGM for Real Life’ in collaboration with Ascensia Diabetes Care. The aim is to boost awareness of Eversense’s benefits.
Adding to the optimism was the latest ratings from HC Wainwright analysts. The firm reiterated its Buy rating in November. It also maintains a $2 SENS stock forecast price target.
3. Agile Therapeutics (AGRX)
Agile Therapeutics focuses on women’s healthcare. It has also recently reported its financial results for the third quarter of 2023. The company provides women with innovative contraceptive options like Twirla®, a non-daily prescription contraceptive patch. This quarter marked a significant achievement for Agile. It saw record highs in key performance indicators such as net revenue, Twirla demand, factory sales, and gross margin.
Twirla, delivered a net revenue of $6.7 million, marking a substantial 122% increase from the same period in 2022. It was also a 21% increase from the previous quarter. Growth in Twirla demand was notable, with a 33% increase from the second quarter of 2023 and a 147% increase from the third quarter of 2022.
The significant revenue growth and demand increase for Twirla indicate strong market acceptance. Reduced operating expenses reflect efficient management, potentially attracting more attention and the decrease in GAAP net loss could improve confidence. However, their limited cash reserves and need for financing might concern investors. The market response will depend on Agile’s ability to sustain growth and manage cash flow effectively.
4. SoundHound AI Inc. (SOUN)
SoundHound AI is building its niche in the voice segment of the growth artificial intelligence industry. The company specializes in conversational intelligence and offers voice AI solutions across various sectors. These sectors include automotive, television, Internet of Things (IoT), and customer service industries. SoundHound’s technology is known for its speed and accuracy in multiple languages, supporting various AI-driven products.
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Supporting this, the company recently reported earnings and it was a record third quarter in 2023. Revenue increased to $13.3 million, and a 57% year-over-year improvement in adjusted EBITDA. This revenue represents a 52% sequential increase and a 19% increase from the previous year, with a notable 73% gross margin. Operational improvements were evident with a 46% reduction in operating loss, a 33% improvement in net loss, and a 40% improvement in net loss per share compared to the previous year.
The company’s CFO, Nitesh Sharan, attributed this success to strong revenue momentum and ongoing progress toward profitability. SoundHound has seen significant adoption in the enterprise restaurant sector, partnering with names like Jersey Mike’s and Krispy Kreme to integrate their voice AI solutions for in-store operations. Other achievements include the deployment of SoundHound Chat AI in European vehicles, a collaboration with Samsung for voice AI drive-thru technology, and recognition in the machine learning field.
The results came right before SoundHound announced a new product named Employee Assist. This conversational AI product is designed to support restaurant employees. It enables them to instantly access critical information about food, tasks, and operations without manual reference or staff distraction.
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