We recently started a series called “Penny Stock of the Day”. These ideas are geared towards traders with an extremely high risk appetite.
Our Penny Stock of the Day is chosen by screening for stocks under $5 and then applying technical analysis on the shortlisted set of penny stocks showing unusual volume. When making these trades, please make sure to pay vigilant attention to pricing moves and have a strict stop loss in place to avoid significant losses.
Penny Stock of the Day: Matterport, Inc. (NASDAQ: MTTR)
Today’s penny stock pick is the spatial data company, Matterport, Inc. (NASDAQ: MTTR).
Matterport, Inc. focuses on digitization and datafication in the United States and internationally. The company offers Matterport Capture Services, a fully managed solution for enterprise subscribers; Matterport Pro3, a 3D camera that scans properties; Matterport Pro2, a 3D camera that captures spaces; LEICA BLK360, a device to create digital twins; Smartphone Capture, a smartphone capture solution for both iOS and Android; and 360 Cameras. It also provides Matterport Axis, a motor-mount accessory for smartphone. The company serves its products in residential and commercial real estate, facilities management and retail, AEC, insurance and repair, and travel and hospitality markets.
Website: https://www.matterport.com/
Latest 10-k report: https://investors.matterport.com/static-files/b0cc8192-42f5-4b4c-b52f-7a575be23039
Analyst Consensus: As per TipRanks Analytics, based on 4 Wall Street analysts offering 12-month price targets for MTTR in the last 3 months, the stock has an average price target of $4.00.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The CoStar Group (NASDAQ: CSGP) announced via a press release that it plans to acquire Matterport for $5.50 per share. Under the terms of the deal, Matterport stockholders will receive $2.75 in cash and $2.75 in shares of CoStar Group common stock for each share of Matterport common stock.
On analyzing the company’s stock charts, there seem to be multiple bullish indications…
Bullish Indications
#1 Falling Wedge Pattern Breakout: The daily chart shows that the stock has been forming a falling wedge pattern for the past several months. These are marked as purple color lines. It has typically taken support at the bottom of the wedge before bouncing back. The stock has currently broken out from the falling wedge pattern. Once the stock breaks out of the falling wedge pattern, it could move higher.
MTTR – Daily Chart
#2 Bullish ADX and DI: The ADX indicator shows bullishness as the +DI line is above the -DI line, and the ADX line is currently moving higher from below the +DI and -DI lines.
#3 Price above MAs: The stock is currently above its 50-day as well as 200-day SMA, indicating that the bulls have currently gained control.
#4 MACD above Signal Line: In the daily chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
#5 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as a pink color dotted line. This looks like a good area for the stock to move higher. The stock is also trading above its 50-week SMA, indicating that the bulls are gaining control.
MTTR – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.
#7 MACD above Signal Line: In the weekly chart, the MACD (light blue color) is currently above the MACD signal line (orange color). This indicates a possible bullish setup.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for MTTR is above the price of $4.90.
Target Prices: Our first target is $7.00. If it closes above that level, the second target price is $7.80.
Stop Loss: To limit risk, place a stop loss at $3.90. Note that the stop loss is on a closing basis.
Our target potential upside is 43% to 59%.
For a risk of $1.00, our first target reward is $2.10, and the second target reward is $2.90. This is a nearly 1:2 and 1:3 risk-reward trade.
In other words, this trade offers 2x to 3x more potential upside than downside.
Potential Risks / Red Flags:
- The company has a history of net losses. MTTR incurred net losses of approximately $199.1 million, $111.3 million, and $338.1 million for the years ended December 31, 2023, 2022, and 2021, respectively. As of December 31, 2023, the company had an accumulated deficit of approximately $778.5 million.
MTTR – Consolidated Statements of Operations
- The company is currently involved in several lawsuits and other litigation proceedings. On July 23, 2021, plaintiff William J. Brown, a former employee and a shareholder of Matterport, Inc. (now known as Matterport Operating, LLC) (“Legacy Matterport”), sued Legacy Matterport, Gores Holdings VI, Inc. (now known as Matterport, Inc.), Maker Merger Sub Inc., Maker Merger Sub II, LLC, and Legacy Matterport directors R.J. Pittman, David Gausebeck, Matt Bell, Peter Hebert, Jason Krikorian, Carlos Kokron and Michael Gustafson in the Court of Chancery of the State of Delaware. MTTR is also involved in litigation with two of its stockholders relating to the issuance of Earn-Out shares in connection with the February 7, 2021, Agreement and Plan of Merger.
- Hedge Funds Decreased Holdings by 1.2M Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Corporate Insiders placed Informative Sells of Shares Worth $1.0M in the Last 3 Months.
Insiders | Source: TipRanks.com
- Despite being a loss-making company, the executives are being paid significant compensation.
MTTR – Executive Compensation
As you can see, today’s featured penny stock offers big upside potential… but it also comes with a number of risks and red flags. As always, when dealing with penny stocks, we advise caution before entering into such high-risk ventures. Remember to think before you trade… understand the risks… and if you decide to trade, stick to your stop-losses!
Happy Trading!
Trades of the Day Research Team
READ BEFORE TRADING PENNY STOCKS: The allure of penny stocks lies in their potential to deliver massive gains in a short period of time. However, in exchange for that opportunity, most penny stocks carry tremendous risk. They can be extremely volatile and are susceptible to “pump and dump” schemes and fraud.
Unlike regular stocks, the financial condition of most penny stock companies can be extremely difficult to analyze, as the majority of such stocks are traded on over-the-counter (OTC) exchanges, which are typically less transparent and less regulated than the major exchanges. In fact, in the penny stock space, it’s often easier to spot warning signs and red flags than it is to identify a sound investment. Nevertheless, we do our best to identify short-term trade opportunities in this exciting space because we know some of our readers are looking for high-risk, high-reward ideas. We just urge you to make sure you fully understand the risks before making any of these trades.
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Source: Trades of the Day