January Brings New Year Opportunity To Penny Stocks; Cryptocurrency Enters The Mix
Penny stocks under performed other investments at the end of 2017 as most speculative capital poured into cryptocurrency and blockchain offerings. The new year brings new opportunity to weak performers, however, and a handful of cryptocurrency and blockchain players have entered the mix of the January Top 10 Penny Stocks to Watch, according to Investopedia.
Sierra Oncology delivered the strongest showing on the December top 10 Penny Stocks to Watch list, gaining more than 30% to an 18-month high. Sierra Oncology was among five previous picks to join the January penny stocks to watch as their technicals portend still higher prices.
The January list includes a trio of perennial laggards that have moved into blockchain technology: Nova Lifestyle, Inc., Long Blockchain Corp. and Nxt-ID, Inc.
January is the most favorable time of the year for small cap stocks as they tend to post their strongest yearly gains in the first quarter due to the tax loss selling that ends on Dec. 31 which allows weak performers to improve. Winners also start the year with strength in January as market players take profits to incur capital gains exposure.
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, held its top position on the stocks to watch list for the second straight month in January. The stock grabbed the top spot in December from the number five spot in November.
The stock went public in July 2014 at $5.00 and suffered an immediate downtrend that continued into the all-time low of 29 cents in April of 2017. 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 before pulling back in a shallow trading range with support at $2.40.
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 company’s history positions MTBC for additional revenue growth in 2018.
During the fourth quarter of 2017, the company anticipated record adjusted EBITDA in excess of $1 million for the quarter, along with continued improvement in GAAP net income and positive cash from operations.
2. EVINE Live, Inc. (EVLV)
EVINE Live, Inc., a multiplatform interactive digital commerce company that sells a mix of proprietary, exclusive and name brands directly to consumers via television, online and mobile, moved from the number seven spot in December to the second spot in January.
The stock 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 in 2013, then recovered, attracting 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. It bounced to 90 cents in August and is testing resistance once again, with a breakout predicting an excellent upside that could test double digits.
A rally over $1.60 would draw strong buying interest, favoring a healthy uptick in 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% excluding the estimated $3 million negative sales impact from Hurricanes Harvey and Irma during the quarter.
The company posted a third quarter net loss of $1.1 million, a 71% improvement year-over-year, with 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.
3. 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 the fifth place in December to the third spot in January, after rising from tenth place in November.
The company went public near $29 in July of 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.
The stock then recovered from its October lows to post a 30% rise to a 17% monthly high. The rally is now filling the June 2016 gap between $6.70 and $2.96, raising odds for healthy upside into the fill price in coming months. The stock’s on balance volume has already reached an all-time high, indicating that price will continue to play catch-up.
For the three months ended Sept. 30, 2017, the company incurred a net loss of $10 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 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.
As of 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.
4. Ladenburg Thalmann Financial Services, Inc. (LTS)
Ladenburg Thalmann Financial Services Inc., a diversified financial services company based in Miami, Fla., moved from the number nine spot in December to the fourth spot in January.
The stock tested a 2007 high at $3.75 in 2013, then broke out, reaching an all-time high at $4.50 in October of 2014. The stock then pulled back in 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 into the decade portends a healthy breakout.
The stock broke out in October and has been crisscrossing resistance near the November 2015 high at $3.28 for the last several weeks. A buying spike above $3.50 should clear this obstacle, opening the door to a test of the 2014 high.
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 in 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.
5. Limelight Networks, Inc. (LLNW)
Limelight Networks, Inc., which operates a content delivery network, fell from the fourth spot in December to the fifth spot in January.
The stock 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 of 2016.
The stock remounted broken support after the presidential election, beginning an uptrend that has reached a 6-year high at $5.18. The uptick stalled above $6.00 in November, generating a decline that’s just filled the October breakaway gap at $4.50. This action could signal a low-risk buying opportunity, ahead of a bounce that resumes the strong uptrend.
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.
6. Nova Lifestyle, Inc. (NVFY)
Nova Lifestyle, Inc., a designer and manufacturer of modern lifestyle furniture, recently formed I Design Blockchain Technology, Inc., a wholly-owned subsidiary.
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 in 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.
On Dec. 11, 2017, 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 of approximately $35 to $36 million and net income of approximately $1 million per month or in the range of $3 million to $3.5 million for the fourth quarter, a multi-fold increase from the same period last year.
Net income per share was expected to be in the range of $0.11 to $0.13 for the quarter, a significant increase over 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.
7. Long Blockchain, Corp. (LTEA)
Long Blockchain Corp., formerly known as Long Island Iced Tea, Corp., rallied to $15.00 in February 2015, then sold off, finding support in 2016 near $3.60. In September 2017 it fell to a multi-year low at $1.70 just a few days before its name change triggered a pre-market rally in the mid-teens that tested the prior high.
The stock opened the regular session in single digits and has since pulled back. A Fibonacci grid stretched across the vertical uptick portends a buying opportunity at the 0.786 retracement level close to $3.40. As of Dec. 29, the stock has hovered just below the $5.00 penny stock threshold.
On Jan. 16, the company announced that it was not proceeding with its previously announced public offering of common stock while also announcing that it entered into a letter-of-intent to merge with Stater Blockchain Limited, a technology company focused on developing and deploying globally scalable blockchain technology solutions in the financial markets. Stater’s wholly-owned subsidiary, Stater Global Markets, is a Financial Conduct Authority regulated brokerage that facilitates market access across multiple instruments including spot FX, digital currency futures and contracts.
The letter of intent contemplates an all-stock transaction pursuant to which Long Blockchain Corp. would form a wholly-owned subsidiary which would merge with Stater, with Stater surviving as a wholly-owned subsidiary of the company. The company anticipates it would remain listed on the Nasdaq Capital Markets following the closing of the transaction.
If the company is able to reach an agreement with Stater and the transaction is consummated, it is expected to complement its recently announced agreement to acquire 1,000 Antminer S9 mining rigs and 1,000 APW3++ PSUs.
8. Nxt-ID, Inc. (NXTD)
Nxt-ID, Inc., which provides a comprehensive platform of technology products and services that enable the Internet of Things (IoT), joined the blockchain bandwagon on Dec. 20, announcing the creation of a cryptocurrency payment platform. The company entered into agreements with institutional investors to purchase an aggregate of approximately $7 million worth of shares of common stock in a registered direct offering.
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.
A rally 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.
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 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 in throughout the next year.
9. Viking Therapeutics, Inc. (VKTX)
Viking Therapeutics, Inc., a clinical-stage biopharmaceutical company focused on the development of novel therapies for metabolic and endocrine disorders, 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, yieldinga 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 and could head higher in January, lifting near broken 2015 range support at $5.70.
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.
10. Aptevo Therapeutics, Inc. (APVO)
Aptevo Therapeutics, Inc., a biotechnology company focused on developing novel oncology and hematology therapeutics, rose to $50 after entering the public exchanges at $8.00 in July 2016, then fell to $1.75 in the first half of 2017. In August, the stock hit an all-time low at $1.15 before staging a recovery in September, reaching a 16-month high at $4.50 in early December. Further growth is expected.
In the 2017 third quarter, the company monetized non-core commercial assets and completed the sale of its three hyperimmune products, WinRho SDF, HepaGam B, and VARIZIG, to Saol Therapeutics for total consideration of up to $74.5 million, raising significant non-dilutive funding to support Aptevo’s ongoing commercial and R&D efforts.
The company also amended the terms of a credit agreement with MidCap Financial allowing Aptevo to retain a $20 million investment by MidCap, further extending Aptevo’s cash runway.
Aptevo also signed a collaboration agreement with Alligator Bioscience to jointly develop and advance a bispecific antibody candidate, ALG.APV-527, with a novel mechanism of action targeting 4-1BB and 5T4, a tumor antigen widely overexpressed in a number of different types of cancer.
The company demonstrated the versatility of the ADAPTIR platform with the development of ALG.APV-527, which targets a co-stimulatory receptor found on activated T cells, illustrating the capability of the ADAPTIR platform to generate immunotherapeutic antibodies with different mechanisms of immune system engagement.
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