Shares Of Urban One Inc. Left The Penny Stock Station This Week
It used to be one of the tall tales of penny stocks where you see the allusive “10 Bagger”. For those who don’t understand the lingo, I’m talking about a stock that runs 1,000% or more in a given period. You’d assume that it’s an irregular occurrence and had this been last year, I might agree. But over the last 6 months, we’ve seen stocks under $5 breakout in a huge way.
I’m not just talking about a few hundred percent; I’m talking about thousands of percentage points. Since the beginning of the year, these multi-baggers are seen more regularly. But this week, one of these “big baggers” scored hugely and it started out as a penny stock trading at $2.18. Urban One, Inc. (UONE Stock Report) (NASDAQ: UONEK) jumped to highs of over $40 on Tuesday. Yes, you read that correctly: $2.18 to over $40 in 2 days:
Shares of Urban One Inc. exploded to record highs on record trading volume this week as traders played catch up once it began hitting more scanners on Tuesday. It’s funny to think but there are still naysayers when it comes to penny stocks. With all of the clear examples we’ve seen this year, the argument against these cheap stocks is likely getting much harder.
I, for one, couldn’t be happier during times like these. Obviously, there is huge risk right now due to the massive move this penny stock has seen. But for right now, pat yourself on the back if you are winning with penny stocks like UONE.
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So What Happened With Urban One Stock?
Obviously, there was something going on right now with all of the trading halts on UONE stock this week. Note that these were volatility halts and nothing regulatory so far. But we know what’s going on in the world right now. There are protests, riots, and now, new government legislation in place to try and remedy a huge racial divide that has reached a breaking point over the last few weeks.
There’s been a growing initiative to support businesses owned and/or in support of the African-American community. Urban One’s mission is “to be the most trusted source in the African-American community that informs, entertains and inspires” an audience by providing “culturally relevant integrated content through our radio, television, and digital platforms.“
Something to consider with this move is the company’s share structure. UONE stock has less than 5 million shares outstanding. That means the float is just as small if not smaller. When huge volume comes into a stock, a low O/S and float can equate to huge swing in the stock. Furthermore, you can see clearly on the chart that UONE stock doesn’t actively trade much at all. This lends itself, again, to higher potential for volatile swings. This is exactly what was seen this week so far.
The interesting part, a disclosure Monday showed that Brigade Capital Management L.P. sold its entire 3.9 million-share stake in Urban One on June 11. The average price? According to the June 15th FORM 4 filing, 3,938,161 shares were sold at an average price of $0.762 worth about $3 million. The value of that position at Tuesday’s high would be worth over $157.5 million.
What Is Urban One Inc.?
The company’s founder Cathy Hughs is deeply rooted in communications industry. Going from radio to TV, her experience has lead her to build Urban One and its affiliated brands.
“We are the largest distributor of urban content in the country. For more than 35 years, Urban One has been the leading voice speaking to Black America.”Urban One Inc.
Considering everything going on, this move comes at a time when entertainment and information is critical. The most recent update from the company came in the form of its quarterly results. Broadcast and digital operating income came in at approximately $37.6 million. This was an increase of roughly $4.3 million from the same period in 2019.
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However, net loss was approximately $23.2 million or $0.51 per share (basic). This compared to a net loss of approximately $3.1 million or $0.07 per share (basic) for the same period in 2019. Nevertheless, UONE stock and its corresponding, non-voting UONEK shares took off to the sky this week.
Can Urban One Stock Go Higher?
This is always the ultimate question especially considering the “unlikely” $33 move came a day after UONE jumped nearly 300% from $2.18 to $8.38 highs. Really let that sink in, this penny stock moved from $2.18 to $40; $33 of that move came 1 day after a massive move in its own right. Considering the potential catalysts in play, I wouldn’t doubt that UONE will be one of the stocks to watch.
Will it remain one of the best stocks to buy? That will depend a lot on what happens in the market. We’re not looking at a normal breakout in UONE; this is an extremely low float penny stock that proved exactly how volatile it can be. By the end of the Tuesday session, UONE dropped from $40 to under $24 after hours; a 40%+ drop.
As great as it might be to see a 1,735% move, the potential for a downward move can come just as quickly. But let us know what you think. Will UONE manage to make new, all-time highs again later in June, or is there a rug pull in store? Drop a comment below.
Good to see people rally around equities that support black culture. Urban One owns a couple great radio stations in my market. This one was building for a couple days with crazy volume. Trade volume was also crazy on EVC, which owns numerous Latino entertainment outlets (primarily Univision). People are researching their trades/investments and trying to support companies that care. Just like you said, that’s what pushed UONE over the edge.