December Penny Stocks To Watch: Investors Await January Effect
Investor interest in penny stocks slackened in November as blue chip and mega-cap stocks grabbed most speculative capital, lifting leading benchmarks to market highs, according to Investopedia.com. Investors focused on big tech and other sectors expected to benefit from tax reform and deregulatory legislation. Careful stock picking still paid off despite the headwinds, as a small group of low-priced issues reached multi-year highs.
Looking ahead, the January effect will bring the most favorable investment season of the year, with bullish effects expected for the latter part of December. Past trends indicate the season holds promise for top performers that suffered in the prior year.
The bottom half of November’s penny stocks to watch took the first five spots on December’s list, with newcomers filling out the bottom half.
Limelight Networks rallied 20% to a 6-year high in mid-November before falling back to its late October level, while many young biotechs recovered from October, notably Sierra Oncology Inc., which posted a 30% rise to a 17% monthly high.
1. Medical Transcription Billing Corp. (MTBC)
Medical Transcription Billing Corp., a healthcare information technology company that provides a fully integrated suite of proprietary web-based solutions, returned from the number five spot in November to take the top December spot.
The stock went public in July 2014 at $5.00 and suffered an immediate downtrend that continued into the April 2017 all-time low at 29 cents. The stock improved a few sessions later, topping out at $3.84.
The stock bounced off that level in early October, lifting to $5.44 and pulling back in a shallow trading range with support at $2.40. A breakout through the range top could build momentum buying interest that could lift the stock.
The company recently reaffirmed its 2017 revenue guidance of $31 to $32 million, representing year-over-year revenue growth of approximately 30%. The recent signing of the largest client in the history positions MTBC for additional revenue growth in 2018.
During fourth quarter 2017, the company anticipates reporting record adjusted EBITDA in excess of $1 million for the quarter, together with continued improvement in GAAP net income and positive cash from operations.
2. Mannkind Corp. (MNKD)
Mannkind, which focuses on the development and commercialization of inhaled therapeutic products for patients with diseases such as diabetes and pulmonary arterial hypertension, rose from the number six spot in November to number two in December. The stock entered a shallow but persistent downtrend in 2004, posting a series of lower highs into 2015. Then the bottom dropped out, dumping the stock through 2012 support at $8.00 into a May 2017 all-time low at 67 cents.
The stock built a 3-month basing pattern above that price level and took off in a new uptrend that hit a 17-month high at $6.96 on Oct. 10. The stock has since been pulling back and could reach strong support between $2.20 and $2.50, offering a low-risk trade entry ahead of a high bounce.
For the third quarter of 2017, net revenue for the company’s flagship product, Afrezza, grew 28% to $2 million in net revenue compared to the second quarter of 2017.
As of September 30, 2017, the amount of Afrezza shipped to the wholesale and retail channels, but not yet recognized as revenue, was $3.0 million, an increase of $0.4 million from June 30, 2017.
For the nine months ended Sept. 30, 2017, total net revenue of $7.2 million was comprised of $4.7 million of Afrezza net sales, $1.7 million from the net sales of surplus bulk insulin to a third party, $0.6 million from the sale of certain oncology intellectual property, and $0.2 million from collaboration net revenue.
3. Kingold Jewelry, Inc. (KGJI)
Kingold Jewelry, Inc., one of China’s leading designers and manufacturers of 24-karat gold jewelry, ornaments, and investment-oriented products, moved from November’s number seven spot to the third spot in December.
The stock posted an all-time high at $11.95 in 2010, then fell into a decline that ended at 88 cents in 2011. The stock broke that support level in the second half of 2015, falling to an all-time low at 49 cents, then turned higher in a recovery wave. This launched March 2016 buying signals, delivering an advance to a 4-year high at $2.84 in August 2016.
The stock carved a higher low into March 2017 and is now testing multi-year resistance, with a breakout above the 2016 high favoring upside that could reach $7.00.
For the three months ended Sept. 30, 2017, the company sold a total of 30.1 metric tons of gold, of which branded production was 14.6 metric tons, representing 48.6% of total gold sold, and customized production was 15.5 metric tons, representing 51.4% of total gold sold in the third quarter of 2017.
In the third quarter of 2016, the company sold a total of 20.6 metric tons, of which branded production was 10 metric tons, or 48.3% of the total gold sold, and customized production was 10.6 metric tons, or 51.7% of total gold sold.
For the nine months ended Sept. 30, 2017, the company sold a total of 72.2 metric tons of gold, of which branded production was 34.7 metric tons, representing 48.1% of total gold sold, and customized production was 37.5 metric tons, representing 51.9% of total gold sold for the period.
In the nine months ended Sept. 30, 2016, the company sold a total of 55.7 metric tons, of which branded production was 28.6 metric tons, or 51.4% of the total gold sold, and customized production was 27.1 metric tons, or 48.6% of total gold sold.
4. Limelight Networks, Inc. (LLNW)
Limelight Networks, Inc., which operates a content delivery network, rallied 20% to a 6-year high in mid-November before falling back to its late October level. The stock ended a decline at $1.75 in 2008, then bounced to $8.97 in 2010. It returned to support in 2011 before breaking down four years later, dropping to an all-time low at 90 cents in February 2016.
The stock remounted broken support after the presidential election, beginning an uptrend that has reached a 6-year high of $5.18. The October breakout above the June 2015 high at $4.43 will likely get tested in the coming weeks, with a pullback as low as $3.50, offering a buying opportunity ahead of a trend advance near the 2010 high around $9.00.
Revenue for the third quarter was $46.1 million, the highest in 19 quarters, up 17% year over year.
GAAP gross margin was 48.4%, the highest in company history.
Gross margin expanded by 730 basis points year over year. Cash gross margin of 58.9% was the highest since 2008.
Non-GAAP net income was $2.2 million, the highest third quarter since 2007.
Adjusted EBITDA was $7.4 million, the highest third quarter in company history.
5. Sierra Oncology, Inc. (SRRA)
Sierra Oncology, Inc., a clinical stage drug development company focused on advancing next generation DNA damage response (DDR) therapeutics for the treatment of patients with cancer, rose from tenth place in November to fifth in December.
The stock recovered from its October lows to post a 30% rise to a 17% monthly high.
The company went public near $29 in July 2015 and began a downtrend that continued through a June 2017 all-time low at $1.10. The stock turned higher in July, hitting the 200-day EMA in October and breaking out shortly after, marking the first time in the stock’s public history it closed above this long-term barrier.
An extended testing period could follow, with pullbacks to new support between $1.75 and $2.00, offering low-risk buying opportunities ahead of penetration into the unfilled June 2016 gap between $3.00 and $6.20.
For the three months ended Sept. 30, 2017, Sierra incurred a net loss of $10.0 million compared to a net loss of $15.2 million for the three months ended Sept. 30, 2016. For the nine months ended Sept. 30, 2017, Sierra incurred a net loss of $31.4 million compared to a net loss of $38.6 million for the nine months ended Sept. 30, 2016.
Cash and cash equivalents totaled $107.8 million as of Sept. 30, 2017, compared to $116.7 million as of June 30, 2017, and $109.0 million as of Dec. 31, 2016. The company believes its existing cash and cash equivalents will be sufficient to fund current operating plans through approximately mid-2019.
At Sept. 30, 2017, there were 52,268,443 shares of common stock issued and outstanding, and stock options to purchase 7,685,449 shares of common stock issued and outstanding.
6. Central European Media Enterprises, Inc. (CETV)
CETV, a media and entertainment company operating businesses in Bulgaria, the Czech Republic, Romania and the Slovak Republic, ended a multi-year uptrend at $126.53 in 2007 and sold off at $4.67 during the 2008 economic collapse.
The stock bounced into the upper 30s at the start of the millennial decade, then suffered a downtrend that broke support at the prior low in 2013.
In March 2017, the stock rallied, then stalled at 4-year resistance in April, yielding six months of testing breaking out in November looking to reach the 2013 high at $6.65.
In the third quarter, net revenues increased 11% at actual rates and 5% at constant rates to $119.4 million. Operating income rose 40% at actual rates and 35% at constant rates.
Unlevered free cash flow for the nine months ended Sept. 30, 2017 increased 14%.
Proceeds from the sale of company operations in Croatia and Slovenia, which is expected to close by the end of 2017 or early 2018, will be used to repay debt, and this is expected to decrease the current cost of borrowing by an additional 150 basis points to 4.5%.7.
7. EVINE Live, Inc. (EVLV)
EVINE Live, Inc., a multiplatform interactive digital commerce company that offers a mix of proprietary, exclusive and name brands directly to consumers via television, online and mobile, hit an all-time low at 18 cents in March 2009, then bounced to $8.73 in 2011. The $1.50 level held through a pullback into 2013, then tested at the recovery high that attracted aggressive selling pressure that ended in a 2015 reversal.
The stock broke support in January 2016, falling to a 6-year low at 41 cents, then recovered a bit, testing a new resistance that has entered its second year. A rally over $1.60 would draw strong buying interest, favoring a healthy uptick into the $2.40 September 2016 high.
The company posted third quarter net sales of $150 million, which is less than a 1% decrease year-over-year. Management estimated net sales would have increased 1.0% when excluding the estimated $3 million negative sales impact from Hurricanes Harvey and Irma during the quarter.
The company posted a net loss of $1.1 million, a 71% improvement year-over-year, earnings per share of ($0.02), a 67% improvement year-over-year, and an Adjusted EBITDA of $3.8 million, a 49% improvement year-over-year.
Beauty was the top performing category in the quarter, growing 10% year-over-year. Fashion, home and consumer electronics also increased year-over-year.
The return rate for the quarter was 19.1%; an improvement of 140 basis points year-over-year.
Gross profit as a percentage of sales increased 150 basis points to 38.1% year-over-year, driven primarily by improved rates. Gross profit dollars increased 3% to $57.3 million year-over-year.
Operating expense remained flat at $58 million year-over-year.
8. United Microelectronics, Corp. ADS (UMC)
United Microelectronics, Corp. ADS, which manufactures semiconductors in Taiwan, broke 5-year support at $4.00 in 2007, then sold off to $1.47 during the 2008 economic collapse. A recovery in 2010 ended at new resistance, beginning a decline in 2008 that fell to a low at 5 cents in August 2015.
The stock then recovered, reaching resistance at $2.77 in September 2017. The stock has spent nearly three months consolidating at that level, raising odds for a breakout that could find 10-year resistance at $4.00.
State Street Corp. boosted its stake in UMC by 6.1% during the second quarter, according to the company in its most recent SEC filing. The institutional investor owned 2,744,618 shares of the semiconductor company’s stock after purchasing an additional 156,717 shares during the quarter. State Street Corp owned about 0.11% of UMC worth $6,698,000 as of its most recent SEC filing.
9. Ladenburg Thalmann Financial Services, Inc. (LTS)
Ladenburg Thalmann Financial Services Inc., a diversified financial services company based in Miami, Fla., tested a 2007 high at $3.75 in 2013, then broke out, reaching an all-time high at $4.50 in October 2014. The stock then pulled back into December, finding support at $3.30 before breaking in July 2015, falling into a volatile decline.
Buying activity resumed in September near $1.80 when two 2016 tests at that level completed a triple bottom reversal. The uptrend found resistance at $2.80 in September 2017 and is now challenging the 2014 breakdown level. The strongest accumulation thus far in the decade portends a healthy breakout.
The company recently announced that it has closed its previously announced underwritten registered public offering of $72.5 million aggregate principal amount of 6.50% senior notes due 2027.
The offering resulted in net proceeds of approximately $69.6 million after deducting underwriting discounts and commissions, but before expenses. The company plans to use the net proceeds from the offering for general corporate purposes.
During the three months ending Sept. 30, 2017, total revenue was $322,309 compared to $274,323 in the same period in 2016. Net income was $4,499 compared to a $7,514 loss in 2016. EBITDA was $16,662 compared to $5,564 in 2016.
10. UQM Technologies, Inc. (UQM)
UQM Technologies, Inc., a developer of alternative energy technologies, hit an 8-year high at $7.45 in 2009, then entered a downtrend that bottomed out at 42 cents in January 2017. The stock began strongly in May, posting a series of new highs into the fourth quarter.
The stock has since reached resistance at the 2015 high at $1.30, nearly completing a breakout pattern that could support an upside into the 2014 high at $3.45. The stock’s balance volume reached the highest level since 2015 recently.
The company has announced it will be a 25% partner in a joint venture with China National Heavy Duty Truck Group Co. Ltd. and Sinotruk Global Village Investment Limited, a Hong Kong based limited liability company owned by CNHTC, with an option to increase its ownership to 33% after the first year of operation.
The initial total capital of the joint venture will be $24 million, with UQM contributing $6 million in three installments over the next year.
For the third quarter ended Sept. 30, 2017, total revenue was $2.8 million compared to $1.0 million in the third quarter last year, an increase of 169%. Net loss for the third quarter was $543,000, or $0.01 per common share. This compares to a net loss of $2.4 million, or $0.05 per common share, for the same period last year.
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