Healthy Stage Set For February Penny Stocks To Watch
A broad-based uptrend lifted all classes of January stocks, creating a healthy environment for penny stock plays in February, according to Investopedia. Big tech and blue chips posted the strongest showings, with tax cut legislation creating additional enthusiasm. The Russell-2000 small-cap index posted an all-time high and continues to build strength.
Penny stocks are poised to benefit in such an environment, emerging from multi-month basing patterns since the middle of 2017.
Equity blockchain plays subsided a bit in January, following a healthy fourth quarter. Blockchain companies nonetheless are among the February stocks to watch, along with emerging biotechnology companies and some beaten down stocks that are attracting new interest.
The top four stocks in the February Penny Stocks To Watch return from the January list.
1. Viking Therapeutics, Inc. (VKTX)
Viking Therapeutics, Inc., a clinical-stage biopharmaceutical company focused on the development of novel therapies for metabolic and endocrine disorders, rose from the ninth spot on the January watch list to become the top stock to watch in February.
The company went public at $8.50 in April 2015, topping out at $10.00 a month later. The downtrend found support just under $1,00 in November 2016, yielding a test in August of 2017 that completed a bullish double bottom reversal.
A September rally lifted the stock into December’s 2-year high at $4.40. The stock has consolidated gains in a narrow trading band, entering an uptrend that reached $5.19 on Jan. 9, 2017. A breakout above this level could attract broad buying interest.
The company in December of 2017 announced the closing of its previously announced underwritten public offering of 5.9 million shares of its common stock, including 769,565 shares sold pursuant to the underwriters’ full exercise of their option to purchase additional shares to cover over-allotments, at a public offering price of $2.50 per share, before deducting underwriting discounts and commissions and estimated offering expenses payable by Viking.
The gross proceeds from this offering are approximately $14.8 million, before deducting underwriting discounts and commissions and other estimated offering expenses. The company intends to use the net proceeds from the offering for continued development of its VK5211, VK2809 and VK0214 programs and for general research and development, working capital and general corporate purposes.
2. Nova Lifestyle, Inc. (NVFY)
Nova Lifestyle, Inc., a designer and manufacturer of modern lifestyle furniture, rose from the number six spot in January to the second top stock to watch in February.
The furniture maker went public at $2.05 in January 2013 and posted an all-time high at $10.35 a year later. The stock then declined into July 2016 to an all-time low at 38-cents, then recovered to $5.15 in October. In the summer of 2017, the stock spiked to yearlong range resistance at $2.75.
It turned higher in the fourth quarter of 2017, but fell in November after shifting its business model to blockchain technology. The buying impulse stalled at $3.10, holding close to that resistance level in the last month, raising odds for a breakout that could reach the 2016 high.
On Dec. 11, 20171, the company approved a share buyback program to purchase up to $5 million of its common stock in transactions conducted through a broker or dealer in compliance with Rule 10b-18 promulgated under the Exchange Act. The duration of the program will be one year. The share buyback program will be funded from the company’s cash and future cash provided by operating activities.
In November of 2017, the company issued fourth quarter guidance, noting that it expected to generate revenue to be approximately $35 to $36 million and net income to be approximately $1 million per month or in the range of $3 million to $3.5 million for the fourth quarter, a multifold increase from the same period the prior year.
Net income per share was expected to be in the range of $0.11 to $0.13 for the quarter, a significant increase versus the prior year.
The company noted its growth is based on expanded sales channels, new product offerings and repeat customer orders from Asia and Australia and expanded profit margins across nearly all product lines.
The company recently formed I Design Blockchain Technology, Inc., a wholly-owned subsidiary.
3. Nxt-ID, Inc. (NXTD)
Nxt-ID, Inc., which provides a comprehensive platform for technology products and services that enable the Internet of Things (IoT), rose from the number eight spot in January to the February number three spot.
The company went public at $30 in 2013 and posted an all-time high at $72.50 a month later. The stock fell to $1.60 in December of 2015, falling even further into November 2017.
The company joined the blockchain bandwagon on Dec. 20, announcing the creation of a cryptocurrency payment platform. The company then entered into agreements with institutional investors to purchase an aggregate of approximately $7 million of shares of common stock in a registered direct offering.
A vertical rally spike and deep pullback followed the company’s blockchain news while a Fibonacci grid stretched across the uptick, indicating a buying opportunity at the 0.786 retracement level near $2.75.
The pullback settled at the 50- and 200-day EMAs, just below the 0.786 Fibonacci rally retracement level, as a bounce over $3.00 launched a preliminary buying signal. It will take a buying spike over stronger resistance between $3.70 and $4.10 to generate stronger upside.
On Dec. 19, 2017, Australia and New Zealand Banking Group Limited and Fit Pay, Inc., a wholly owned subsidiary of NXT-ID, Inc. announced an agreement to extend contactless payment capabilities to a range of new devices. The agreement enables ANZ cardholders to make secure contactless payments at NFC-enabled point-of-sale locations directly from the Internet of Things (IoT) and wearable devices that are integrated with the FitPay payment platform.
Under the agreement, ANZ will participate in FitPay’s Token Requester Program, which enables cardholders to securely add their payment credentials to devices that are integrated with FitPay’s contactless payment platform. The platform uses tokenization, a payment security technology that replaces cardholders’ account information with a unique digital identifier (a “token”) to transact highly secure contactless payments. It allows consumers to pay at near-field communication-enabled point-of-sale terminals with a simple tap.
The collaboration with ANZ includes ensuring that the devices meet ANZ’s technical, usage, security, branding, and consumer experience requirements. Manufacturers of 15 IoT and wearable devices are currently integrating with the FitPay payment platform. Product announcements from the manufacturers of these devices are anticipated throughout the year.
4. Westport Fuel Systems, Inc. (WRPT)
Westport Fuel Systems Inc., a supplier of clean-burning fuel systems and components, reached an all-time high at $50.19 in 2012, then entered a decline to an all-time low at 82 cents of March 2017. The stock rallied to a 2-year high at $4.09 in October before pulling back into a trading range with support at $2.53.
An early January breakout attempt failed, creating a bull flag pullback now sitting on the 50-day EMA. An upturn could emerge, driving the stock to 2015 resistance $6.74.
Total consolidated revenues from continuing operations for the three months ended Sept. 30, 2017 increased by $4.7 million or 8% from $56.1 million in 2016 to $60.8 million in 2017. Total consolidated revenues from continuing operations for the nine months ended Sept. 30, 2017 increased by $65.5 million, or 56% from $117.3 million in 2016 to $182.8 million in 2017.
The company recently received certifications from both the U.S. Environmental Protection Agency and Air Resources Board in California for its 2018 ISX12N natural gas engine. Like the Cummins Westport L9N engine, the ISX12N meets California ARB optional low NOx standard of 0.02 g/bhp-hr, a 90% reduction from engines operating at the current EPA NOx limit of 0.2 g/bhp-hr. The ISX12N also meets 2017 EPA greenhouse gas emission requirements.
The company also recently entered into a development and supply agreement with Tata Motors Limited for its 4-cylinder and 6-cylinder, natural gas spark-ignited commercial vehicle engine family to meet the Indian Government’s new Bharat Stage VI emission standards, scheduled to take effect in April of 2020.
5. QuickLogic, Corp. (QUIK)
QuickLogic Corp., a developer of ultra-low power, multi-core voice enabled SoCs, embedded FPGA IP, display bridge and programmable logic solutions, tested a 2009 low at 51 cents in the fourth quarter of 2016, then rallied to a 2-year high at $2.48 in March 2017. The decline that followed found support at $1.15 in June.
An August test created a double bottom reversal that delivered modest upside in the last five months. The stock now trades just 50 cents under the 2017 peak and could test that level again soon. A breakout could attract buying interest, pushing the stock to a resistance between $4.50 and $5.00.
During the third quarter of 2017, the company generated total revenue of $3 million, which is flat compared to the prior quarter and represents an increase of 6% from the third quarter of 2016.
New product revenue was $1.5 million, which is flat compared to the prior quarter and represents an increase of 10% from the third quarter of 2016, which was primarily due to an increase of connectivity product PolarPro shipments.
The company’s mature product revenue was $1.5 million, flat compared to the prior quarter and third quarter of 2016, respectively.
For the third quarter of 2017, revenue generated from Samsung accounted for 48% of new product revenue and 24% of total revenue compared to 43% and 21%, respectively, for the second quarter of 2017.
In March of 2017, the company issued 11.3 million shares of common stock at a price of $1.50 per share, $0.001 par value. The company received net proceeds of approximately $15.2 million after deducting underwriting commissions and other offering-related expenses.
The company plans to use the net proceeds for working capital, to accelerate the development of next generation products and for general corporate purposes. The company may also use a portion of the net proceeds to acquire and/or license technologies and acquire and/or invest in businesses when the opportunity arises.
The shares were offered pursuant to a shelf registration statement which was declared effective by the SEC on March 16, 2017.
6. Tuesday Morning, Corp. (TUES)
Tuesday Morning, Corp., an off-price retailer with over 715 stores across the United States specializing in name-brand, high quality products for the home, selling luxury textiles, furnishings, housewares and seasonal décor, topped out at an 8-year high in the low 20s in 2014 before entering a decline driven by consumers’ shift to e-commerce.
The downtrend settled just above $1.50, an 8-year low, in June 2017 before a bounce filled the May 2017 exhaustion gap in October. Price action has since hugged the gap fill level, signaling that buying signals will begin when the stock trades over $3.30 to $3.50.
Net sales for the second quarter were $333.8 million, compared to $328.1 million for the second quarter of fiscal 2017. The company’s sales comparison to the prior year is impacted by the net closure of 16 stores during the last year.
Comparable store sales increased 1.8% compared to the same period a year ago, and were comprised of a 1.9% increase in customer transactions, slightly offset by a 0.1% decrease in the average ticket.
During the second quarter, 14 stores relocated, four stores opened, two stores expanded and eight stores closed, for an ending store count of 724 as of Dec. 31, 2017.
Sales at the 55 stores relocated during the past 12 months increased approximately 52% on average for the second quarter of fiscal 2018 as compared to the prior year quarter, and contributed approximately 340 basis points of comparable store sales growth, driven primarily by a better real estate and larger average store footprint.
Gross profit for the quarter decreased $0.3 million to $105.7 million compared to $106.0 million of gross profit in the second quarter of fiscal 2017. Gross margin for the second quarter fiscal 2018 was 31.7% compared to 32.3% last year.
The decrease in gross margin for the quarter was primarily due to a significant unfavorable shift from the first fiscal quarter in markdown timing as compared to the same period in the prior year. Partially offsetting this increase in costs was a continued improvement in initial merchandise mark-up along with lower buying and supply chain costs recognized as compared to the same period in the prior year.
Noble Corp., PLC (NLC.BE)
Noble Corp., PLC reached $40.83 in 2011, then suffered a downtrend falling to a 21-year low in August 2017 at $3.14. The stock turned higher in the fourth quarter, then stalled at $4.75 before rallying in early January to a 9-month high at $5.80.
The stock has since been pulling back and is approaching major support at the breakout level, aligning with the 50- and 200-day EMAs. A bounce could draw strong buying interest and bring the stock near early 2017 resistance levels between $7.50 and $8.00.
Noble Corp. PLC recently announced on behalf of its wholly-owned subsidiary, Noble Holding International Limited (NHIL), that NHIL has commenced cash tender offers for up to an aggregate principal amount that will not result in an aggregate purchase price that exceeds $750 million of NHIL’s outstanding 4% senior notes due 2018 and of which $250 million principal amount is currently outstanding; 4.90% senior notes due 2020, of which $167.766 million principal amount is currently outstanding; 4.625% senior notes due 2021, of which $208.675 million principal amount is currently outstanding; 3.95% senior notes due 2022, of which $125.661 million principal amount is currently outstanding; and 7.75% senior notes due 2024, of which $1 billion principal amount is currently outstanding; and the outstanding 7.50% senior notes due 2019 issued by certain subsidiaries of Noble Corporation, a Cayman Islands exempted company and the guarantor of the notes, of which $201.695 million principal amount is currently outstanding.
8. AVEO Pharmaceuticals, Inc. (AVEO)
AVEO Pharmaceuticals, also known as AVEO Oncology, a biopharmaceutical company dedicated to advancing a broad portfolio of targeted therapeutics for oncology and other areas of unmet medical need, reached an all-time high at $21.55 before entering a downtrend that fell between $5.07 and $3.01. The stock tested this resistance zone unsuccessfully in May 2015, then fell to an all-time low in March 2017 at 50 cents. A subsequent bounce stalled at resistance in August, followed by a fourth quarter reversal that has held firm at the 50-day EMA. The price action has built a basing pattern that could support an uptrend above $8.00.
AVEO Oncology and EUSA Pharma recently announced the presentation of preliminary results from the Phase 2 portion of the TiNivo study, a Phase 1b/2 multicenter trial of oral tivozanib in combination with intravenous nivolumab.
The company recently completed the refinancing of its $20 million debt facility with Hercules Capital, Inc. and its affiliates, the terms of which enable approximately an additional $12.1 million in cash flow over 2018 and 2019, when compared to the prior loan. The new $20 million facility has a 42-month maturity from closing, no financial covenants, a lower interest rate and an interest-only period of no less than 12 months, which could be extended up to a maximum of 24 months, assuming the achievement of specified milestones relating to the development of tivozanib. Proceeds of the new facility will be used to retire the company’s existing $20 million of secured debt with Hercules.
Safe Bulkers, Inc. (SB)
Safe Bulkers, Inc., an international provider of marine dry bulk transportation services, ended an uptrend at $11.48 in 2014, then entered a downtrend to an all-time low at 30 cents in January 2016. The stock then eased into an uptrend, gaining at a modest pace into September 2017 before the rally stalled at $3.65.
The stock carved an ascending triangle pattern in January that currently tests range resistance. A breakout will face a secondary barrier between $4.25 and $4.50.
The company recently called for redemption of all outstanding 8% series B cumulative redeemable perpetual preferred shares, par value $0.01 per share, liquidation preference $25 per share. There are currently 379,514 issued and outstanding series B preferred shares.
The series B preferred shares will be redeemed on Feb. 20, 2018 at a redemption price of $25 per share plus all accumulated and unpaid dividends to, but excluding the redemption date. After the redemption date, all distributions on the series B preferred shares will cease to accumulate, such shares will no longer be deemed outstanding, and all rights of the holders of such shares will terminate, except for the right to receive the redemption price without interest thereon.
In December, the company acquired a 92,000 dead weight, South Korean 2010 built, dry bulk, Post-Panamax class vessel. The vessel is a sister ship of the company’s two existing South Korean Post-Panamax class vessels. The acquisition was financed from cash on hand.
10. Digital Turbine, Inc. (AAPS)
Digital Turbine, Inc., which operates at the convergence of media and mobile communications, connecting top mobile operators, OEMs and publishers with app developers and advertisers worldwide, topped out slightly above $5.00 in 2012, then fell from a triple top pattern in 2015, continuing a downtrend to an all-time low in November 2016 at 56 cents. The stock then rallied, adding points into January 2018, and now trades at a 2-year high while its on-balance volume has hit an all-time high. Such tailwinds should support a greater upside in coming months, moving the stock near triple top resistance between $2.75 and $3.25.
Total revenue for the third quarter of fiscal 2018 was $38 million, representing an increase of 71% year-over-year. Advertising segment revenue of $24.2 million increased 49% year-over-year.
The company benefitted from substantially higher revenue-per-device with its four largest U.S. carrier partners during the quarter. Higher revenue-per-device metrics are reflective of higher average slot counts and strong advertiser demand for unique home screen access.
Content revenue for the third quarter of fiscal 2018 reached an all-time high of $13.8 million, representing year-over-year growth of 128%. Growth within the content business was driven by higher merchant spending levels, as well as the addition of new merchants and services during the quarter.
GAAP gross margin was 25% in the third quarter of fiscal 2018, as compared to 15% in the third quarter of fiscal 2017. Non-GAAP adjusted gross margin was 27% for the third quarter of fiscal 2018, as compared to 24% in the third quarter of fiscal 2017.
Net loss for the third quarter of fiscal 2018 was $3.8 million, or -0.05 per share, as compared to the net loss for the third quarter of fiscal 2017 of $2.6 million, or -$0.04 per share. Non-GAAP adjusted net income was $0.5 million, or $0.01 per share, in the third quarter of fiscal 2018.
Non-GAAP adjusted EBITDA for the third quarter of fiscal 2018 was $1.2 million, as compared to a loss of $2.1 million for the third quarter of fiscal 2017.
Featured image courtesy of Shutterstuck.