4 Penny Stocks Just Hit 52-Week Lows; Can They Recover?
It’s a well-known fact that penny stocks carry huge risks. On the flip-side, there’s a huge reward if the stock goes in the right direction. But the reality of it is that not all penny stocks return triple-digit gains. In fact, many end up losing in a major way. When that happens, it can signal a time to pay attention to these stocks.
Why? When it comes to 52-week ranges, the extreme highs and extreme lows can signal that it’s time for a company to start addressing its strategy. In the case of new highs, the company should find ways to continue delivering on its business model.
With 52-week lows, it’s time for that company to change whatever it is that it’s doing and try to turn things around. Whether or not either of these scenarios actually happen is another story.
Penny Stocks: What To Watch At 52-Week Levels
So, with this in mind, just because a penny stock is at 52-week highs, doesn’t mean it will definitely drop. Also, just because shares are at 52-week lows, it doesn’t mean they’ll turn around.
But in either case, these levels can give traders and investors a nice “heads-up” to pay attention to the next move and either avoid losses or capitalize on a reversal. That obviously depends on countless other factors. With this in mind, here is a list of penny stocks that just hit fresh lows this week. Will they be able to turn around?
Zosano Pharma Corporation
First, on this list of penny stocks, Zosano Pharma Corporation (ZSAN Stock Report) has been dropping like a rock since last February. After the penny stock reached highs of $6.65, we find it trading around $0.88 at the start of this week. After a green day on Tuesday, those holding shares of ZSAN stock woke up to a bloodbath on Wednesday. The stock gapped down from a close of $1.03 on 2/11 to an open of $0.54 on 2/12.
What was the culprit? Zosano announced that it was raising $8 million. Now, you can’t fault a company for wanting to raise money in the public market. That’s one of the main reasons for going public in the first place. But when it raises money at an almost 40% discount to the previous close, that can be a problem for those holding shares above $1.
Furthermore, the company said it will use the proceeds of the offering for “pre-commercialization activities and for general working capital and corporate purposes.” While the company’s lead candidate is a migraine drug, Qtrypta, the company is still awaiting a decision from the FDA on a New Drug Application.
This could come in March according to the company. However, with the recent reaction in the market, it may be a hard pill to swallow for investors right now.
Vislink Technologies, Inc.
Next, Vislink Technologies (VISL Stock Report) essentially followed the same trend as ZSAN above. It reached a big high earlier last year and has done nothing but go down since. Were there a few days in the mix that produced an opportunity for gains, probably. But overall, shares dropped from highs of $8 to a price this week of $0.1955.
For starters, let’s look at some highlights. Vislink managed to secure a few big contracts with the likes of the U.S. Army, NATO Communications and Information Agency, as well as other global clients. This is great news on the surface. But the issue has persisted which is the likely cause of VISL’s constant decline: bad financing.
Negative Sentiment From Raising Capital
If you look through its filings or just read some headlines, you’ll see how often the company has raised money at a discount. This week saw the latest round come up with the company announcing a $6 million raise done at an offering price of $0.22. Though this isn’t any massive discount, it adds to the current amount of dilutive shares already in the market from prior financings.
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Furthermore, the use of proceeds was very vague with the company stating they were for “working capital and general corporate purposes.” In any case, now that the price had deteriorated to these levels, even a $0.05 jump could equate to a meaningful percent change; so there’s that.
Unlike the previous companies listed, Stage Stores (SSI Stock Report) actually showed a lot of promise last year. The penny stock managed to make a move from around $0.70 in August to highs of $9.50 earlier this year. But in a similar fashion to ZSAN and VISL, SSI stock dropped like a rock after delivering some less than good news.
Stage stores released its holiday sales figures. You might think that with the strength of the economy, a retailer wouldn’t have a problem when everyone is seemingly spending money. However, for Stage Stores, the company fell short in comparable-store sales (1.4%) during the period. As a result, the company lowered its forward guidance. Now the company needs to turn over inventory offering deep discounts. Management is anticipating upwards of $30 million in more losses.
Recently there was chatter of a financial restructure and of course, the public started throwing around the “B word”. The Wall Street Journal’s sources said that the company was having difficulty keeping current with vendors and a possible liquidity squeeze. Though Stage Stores hasn’t come out to discuss bankruptcy, speculation has still been abuzz.
Within just over 1 month, SSI stock has dropped by more than 94%. But one positive is that shares reversed aggressively after hitting the new 52-week low on Wednesday. From low to close on 2/12, SSI managed to recover by 64.5%.
Finally, Sunworks Inc. (SUNW Stock Report) is another one of the penny stocks that hit fresh lows today. Like VISL and ZSAN, SUNW stock hasn’t been able to get out of its own way for a while now. At one point last year, shares were trading consistently above $6 per share and even reached highs of $13.79. This week the penny stock hit lows of $0.80. That’s a decline of 94% from its high.
Missed earnings and declining revenue has plagued the company. That’s in spite of Sunworks securing new projects along the way. The company has also been working to pay down debt. But without revenue growth, anyone can see how hard it would be to be bullish on such a company. Shares of the stock continued to slide during after-market trading on Wednesday.