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: New Fortress Energy Inc. (NASDAQ: NFE)
Today’s penny stock pick is the liquefied natural gas (LNG) infrastructure company, New Fortress Energy Inc. (NASDAQ: NFE).
New Fortress Energy Inc. operates as an integrated gas-to-power energy infrastructure company that provides energy and development services to end-users worldwide. The company operates in two segments, Terminals and Infrastructure, and Ships. The Terminals and Infrastructure segment engages in the natural gas procurement and liquefaction; and logistics, shipping, facilities and conversion, or development of natural gas-fired power generation.
The Ships segment offers floating storage and regasification units (FRSU) and liquefied natural gas (LNG) carriers which are leased to customers under long-term or spot arrangements. The company operates LNG storage and regasification facility at the Port of Montego Bay, Jamaica; marine LNG storage and regasification facility in Old Harbour, Jamaica; Dual-fired combined heat and power facility in Clarendon, Jamaica; landed micro-fuel handling facility in San Juan, Puerto Rico; LNG receiving facility and gas-fired power plant in Baja California Sur, Mexico; and LNG receiving facility in southern coast of Brazil, as well as a Miami facility.
Website: https://www.newfortressenergy.com/
Latest 10-K report: https://ir.newfortressenergy.com/static-files/f0f1e7f9-958d-46d2-9bac-27dd7e1f8865
Analyst Consensus: As per TipRanks Analytics, based on 5 Wall Street analysts offering 12-month price targets for NFE in the last 3 months, the stock has an average price target of $3.75, which is nearly 29% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company’s new $4B, 7-year deal with Puerto Rico for 40-75 TBtu annual deliveries is expected to lock in revenue stability and boost long-term cash flow.
- The company had sold its assets and operations in Jamaica to Excelerate Energy, Inc. The proceeds from the transaction are expected to be used to reduce NFE’s corporate debt and for general corporate purposes.
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 lines. It has typically taken support at the bottom of the wedge before bouncing back. The stock has currently broken out of the falling wedge pattern. Once the stock breaks out of the falling wedge pattern, it could move higher.
NFE – 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 MA: The stock is currently above its 50-day SMA, indicating that the bulls have currently gained control.
#4 Bullish Aroon: The value of Aroon Up (orange line) is above 70 while Aroon Down (blue line) is below 30. This indicates bullishness.
#5 Above Support Area: The weekly chart shows that the stock is currently trading above a support area, which is marked as a pink dotted line. This looks like a good area for the stock to move higher.
NFE – 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 NFE is above the price of $3.05.
Target Prices: Our first target is $4.30. If it closes above that level, the second target price is $5.50.
Stop Loss: To limit risk, place a stop loss at $2.30. Note that the stop loss is on a closing basis.
Our target potential upside is 41% to 80%.
For a risk of $0.75, our first target reward is $1.25, and the second target reward is $2.45. 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.
NFE – Consolidated Statements of Operations
- The company has significant debt. If NFE fails to pay off its $511 million of 2026 notes by July 1, 2026, it triggers clauses that make over $5 billion of additional loans and notes immediately payable. This may effectively shut the company down.
- Hedge Funds Decreased Holdings by 278.1K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- NFE is currently dependent upon a limited number of customers, the loss of a significant customer could adversely affect the company’s operating results.
- Despite being a loss-making company, the executives are being paid significant compensation.
NFE – 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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