Analysts Think This $3 Stock Has 42% Upside Potential

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: Evolv Technologies Holdings, Inc. (NASDAQ: EVLV)

Today’s penny stock pick is the AI-based security screening products company, Evolv Technologies Holdings, Inc. (NASDAQ: EVLV).

Evolv Technologies Holdings, Inc. provides artificial intelligence (AI)-based weapons detection for security screening in the United States and internationally. Its products include Evolv Express, a touchless security screening system designed to detect firearms, improvised explosive devices, and tactical knives; and Evolv Insights which provides self-serve access, insights regarding visitor flow and arrival curves, location-specific performance, system detection performance, and alarm statistics.

Website:  https://evolv.com/

Latest 10-k report:  https://ir.evolvtechnology.com/sec-filings/all-sec-filings/content/0001628280-24-008053/nhic-20231231.htm

Analyst Consensus: As per TipRanks Analytics, based on 2 Wall Street analysts offering 12-month price targets for EVLV in the last 3 months, the stock has an average price target of $4.75, which is nearly 42% upside from current levels.

Potential Catalysts / Reasons for the Hype:

• The company announced the expansion of its Evolv Express® weapons detection systems at T-Mobile Park, home of the Seattle Mariners, for the 2025 Opening Day. EVLV was also given the designation of “Preferred Fan Security Screening Provider”.
• In Q3 2024, Evolv Technologies surpassed 2 billion screenings and added 465 new subscriptions.
• The company targets a broad market, which includes education, healthcare, entertainment, government, and industry. This represents a potential $20 billion annual market.

On analyzing the company’s stock charts, there seem to be multiple bullish indications…

Bullish Indications

#1 Symmetrical Triangle Pattern: The daily chart shows that the stock has currently formed a symmetrical triangle pattern, which is marked as purple color lines. A symmetrical triangle pattern represents a period of consolidation before the price breaks out. This is typically formed when there is indecision in the price movements and uncertainty among the buyers and sellers. Once a breakout from the upper trend line occurs, it usually signifies the start of a new bullish trend.

#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 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.

#4 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.

#5 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart, indicating possible bullishness.

#6 Bullish RSI: In the weekly chart, the RSI is currently above 50 after moving higher from oversold levels. 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 EVLV is above the price of $3.50.

Target Prices: Our first target is $5.10. If it closes above that level, the second target price is $6.50.

Stop Loss: To limit risk, place a stop loss at $2.50. Note that the stop loss is on a closing basis.

Our target potential upside is 46% to 86%.

For a risk of $1.00, our first target reward is $1.60, and the second target reward is $3.00. 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:

1. The company has a history of net losses. EVLV reported a net loss of $106.3 million, and $86.4 million for the years ended December 31, 2023 and 2022, respectively.
   

   EVLV – Consolidated Statements of Operations

2. The company has a history of litigations. The FTC has previously requested information about certain aspects of the Company’s marketing practices. Further, in February 2024, EVLV received a subpoena from the SEC, Division of Enforcement, requesting to produce certain documents and information, much of which is similar to the documents and information previously requested by the FTC.
3. Hedge Funds Decreased Holdings by 5.6M Shares Last Quarter.
   

   Hedge Funds | Source: TipRanks.com

4. The company had failed to file its Quarterly Report on Form 10-Q for the period ended September 30, 2024, due to an internal investigation and the need to prepare amended financial statements.
5. Despite being a loss-making company, the executives are being paid significant compensation.
   

   EVLV – 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