Penny Stocks Struggle In November, Creating Opportunity For Gains
Penny stocks weakened beginning in October, with market players focusing on tax cut legislation hoping to boost blue-chip earnings in upcoming quarters, according to the Investopedia Stocks to Watch for November. The Russell-2000 small-cap index suffered, while the S&P 500 and Nasdaq Composite rose to all-time highs.
Speculative fervor through year’s end is expected to push penny stocks, although improved returns may need to wait until the 2018 January Effect.
Plug Power Inc. had the best group performance in October, lifting more than 18% to a 2-year high, while other picks built basing patterns that signal a balance between buyers and sellers. Such issues are expected to gain ground as market players take profits in tax-sensitive blue chips and move into other opportunities.
Biotech stocks appeared to have topped out for the year after Celgene Corp. triggered a broad-based decline after withdrawing a critical drug application. As a result, the November list focuses on suffering technology stocks that could take advantage of broad fourth-quarter market leadership.
The top three penny stocks in November returned from the October list.
1. Plug Power, Inc. (PLUG)
Plug Power, Inc., a manufacturer of fuel cells, rose from number seven in October to lead the November list.
The company sold off from a split-adjusted $1,565 in 2000 to an all-time low at 12 cents in 2013. The stock turned higher in March 2014, then stalled at $11.72 before falling to 83 cents in March 2017.
In the last seven months, the price spiked to $2.70, before suffering another fall. A breakout should target the May 2014 low at $3.65, which would mark a high percentage rally from the current level.
The company delivered a record third quarter this year, deploying nine GenKey sites, comprising 2,753 GenDrive units, and a unit increase of over 200% from the previous quarterly record.
Fulfillment of multi-site deals announced in the second and third quarters with Amazon and Walmart comprised the majority of order volume for the third quarter.
The company continued the expansion of its blue-chip customer base, successfully securing contracts with two large manufacturing clients in the U.S. automotive industry and one new customer in Europe. It completed $44 million in new bookings, bringing the year-to-date total to nearly $160 million.
2. MicroVision, Inc. (MVIS)
MicroVision, Inc., a provider of ultra-miniature projection display and sensing technology, rose from the number 9 spot in October to number two in November.
The stock topped out at a split-adjusted $548 in 2000 before entering a downtrend that continued into a 2012 low at $1.11.
A 2013 bounce to $3.49 carved resistance, ahead of multiple reversals that have outlined a rectangular basing pattern. The stock rebounded in October 2016, entering an uptrend that has reached the upper half of its persistent trading range.
The stock broke out to a 22-month high in September and has since settled near $2.75, signaling an upside that could reach the 2015 high at $4.23.
The company in August sold 1.5 million unregistered shares to a private investor who is also a current shareholder at a price of $2.10 per share, for aggregate consideration of $3.15 million. MicroVision intends to use the proceeds from the issuance for general corporate purposes.
MicroVision’s display and sensing solution can be adapted to an array of applications and form factors. The company’s business model and product line offering includes display and sensing engines, licensing its patented technology and selling components to licensees for incorporation into their scanning engines.
In September, MicroVision and WPG Holdings, a distributor of semiconductor components in Asia, entered into an agreement for distribution of MicroVision’s line of PicoP scanning engines across Asia.
3. BioDelivery Science International, Inc. (BDSI)
BioDelivery Science International, Inc. rose from the number 10 spot in October to the number three spot in November.
The stock broke above 7-year resistance at $8.26 in 2014, then rallied to an all-time high of $18.48 a few months later. A pullback in 2015 triggered a failed breakout, delivering a decline that continued into a November 4-year low at $1.50.
The stock tested that level in April 2017 and turned higher, supporting an uptrend to a 52-week high oof $3.60 in July. The stock fell in September, finding support at the 200-day EMA. It could bounce back to the third quarter high.
The company announced in September that Health Canada granted market authorization to formally transfer the Drug Identification Number (DIN) ownership of Belbuca (buprenorphine) buccal film in Canada to BDSI’s commercial partner, Purdue Pharma in Canada. This approval triggers a milestone payment to BDSI.
Belbua incorporates BDSI’s BioErodible MucoAdhesive (BEMA) drug delivery technology and is the only long-acting opioid that uses novel buccal film technology to deliver buprenorphine for appropriate patients living with chronic pain.
Belbuca was approved in Canada in June 2017 for the management of pain severe enough to require daily, continuous, long-term treatment and that is opioid-responsive and for which alternative options are inadequate.
4. Lightpath Technologies, Inc. (LPTH)
Lightpath Technologies, Inc., a provider of optics, photonics and infrared solutions for the industrial, defense, telecommunications, testing and measurement, and medical industries, hit an all-time low at 30 cents in February of 2009 after a multi-year fall that began with the dot.com bubble in 2000.
The stock bounced to $3.67 a few months later, establishing a resistance level that lost in breakout attempts in 2010, 2013 and 2016.
An upturn in December 2016 hit another barrier in March 2017, giving way to a rounded base followed by an October breakout. The bullish price action opens the door to potentially rapid gains into 2006 resistance at $7.87.
Revenue for the first quarter of fiscal 2018 was approximately $7.6 million, an increase of approximately $2.6 million, or 51%, as compared to the same period of the prior fiscal year. The increase from the first quarter of the prior fiscal year is attributable to an approximately $3.1 million increase, or 579%, in revenues generated by infrared products.
Total cost as a percentage of revenue continues to decline, improving to 41% in the first quarter of fiscal 2018, compared to 49% in the first quarter last year.
Net income for fiscal 2018 first quarter was approximately $218,000, compared to approximately $140,000 for the first quarter of fiscal 2017.
5. 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, together with related business services, to healthcare providers practicing in ambulatory care settings, went public in July 2014 at $5.00 and suffered an immediate downtrend that continued to the April 2017 all-time low at 29 cents.
The stock improved a few sessions later, topping out at $3.84 and falling into a broad basing pattern at the 200-day EMA.
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 into the IPO print.
The company recently reaffirmed its 2017 revenue guidance of $31 million 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.
6. 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, 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 October 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 Afrezza product grew 28% to $2 million, compared to the second quarter.
As of Sept. 30, 2017, the amount of Afrezza shipped to the wholesale and retail channels, but not yet recognized as revenue, was $3 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.
7. 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, posted an all-time high of $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 that remounted broken support. 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 in 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.
8. Alaska Communications Systems Group, Inc. (ALSK)
Alaska Communications Systems Group, Inc., a provider of advanced broadband and managed IT services for businesses and consumers in Alaska, topped out in the upper teens in 2007, then began a downtrend that found support near $5.00 in 2009. The stock then broke that low in 2011, falling into a test of the 2002 low near $1.50.
The stock then built a 5-year basing pattern at that level and is now trading near a 2-year high. Its 2015 resistance around $2.50 marks the final barrier, ahead of a rally that tests long-term range resistance at $3.90, which it posted in 2013.
The buying impulse could offer high percentage gains.
Total revenue for the third quarter increased to $56.7 million, up 0.4% from $56.5 million.
Total broadband revenue reached $31.3 million, representing 55.3% of total revenue and up 6.8% from $29.4 million.
Operating income for the quarter was $3.5 million, compared to $4.1 million.
Net income was $0.3 million in both periods.
Net cash provided by operating activities was $8.6 million for the third quarter, compared to $9.5 million.
Capital expenditures were $13.5 million for the quarter, compared to $8.7 million.
9. Limelight Networks, Inc. (LLNW)
Limelight Networks, Inc., a digital content delivery provider, 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 of $4.43 will likely get tested in 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.
10. Sierra Oncology, Inc. (SRRA)
Sierra Oncology, Inc., a clinical stage drug development company focused on advancing next-generation DNA damage response therapeutics for the treatment of patients with cancer, went public near $29 in July 2015, then began a downtrend that continued through a June 2017 all-time low of $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 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 that its existing cash and cash equivalents will be sufficient to fund current operating plans through approximately mid-2019.
On 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.
The November penny stock watch list provides a balance between junior biotech and depressed technology plays, with multi-week basing patterns offering low-risk buying opportunities for patient market players.
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