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: LifeMD, Inc. (NASDAQ: LFMD)
Today’s penny stock pick is the telehealth and pharmacy company, LifeMD, Inc. (NASDAQ: LFMD).
LifeMD, Inc. operates as a direct-to-patient telehealth company, engages in the provision of patients access to virtual medical care and pharmacy services in the United States. It offers telehealth platform comprising Rex MD, a men’s telehealth platform that provides virtual diagnosis, treatment, and prescription medications for men’s health conditions, including erectile dysfunction, premature ejaculation, hair loss, insomnia, weight loss, and performance anxiety; and ShapiroMD that provides virtual medical treatment, prescription medications, patented doctor formulated OTC products, topical compounded medications, and medical devices treating male and female hair loss.
The company also provides LifeMD PC, a virtual primary care and telehealth service that is a provider for their primary care, urgent care, and chronic care needs; and offers virtual medical care, including on-demand consultations and treatment, prescription medications, diagnostics and imaging, wellness coaching, integration with in-home tools, and more. In addition, it offers GLP-1 for weight management and in-home health monitoring devices. The company was formerly known as Conversion Labs, Inc. and changed its name to LifeMD, Inc. in February 2021.
Website: https://lifemd.com/
Latest 10-K report: https://storage.googleapis.com/sec-files-1/MbOR591uN7rFqBfWopf6/7429f1cf41710609176e8b1215b162eb/7429f1cf41710609176e8b1215b162eb-file-1.pdf?v=1773296994347
Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analysts offering 12-month price targets for LFMD in the last 3 months, the stock has an average price target of $9.00, which is nearly 122% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- There is now a strong demand for weight management and GLP-1 therapies. LifeMD expanded its partnership with Novo Nordisk and is now offering the newly FDA-approved oral Wegovy pill. Over 80% of their new weight management patients are initiating branded therapy, and new patient sign-ups are nearing a massive 700 per day.
- Hedge Funds Increased Holdings by 95.2K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Telehealth growth post-COVID, aging population, and obesity epidemic favor companies like LFMD. Many analysts and investors see it as undervalued with high-growth potential in a $100B+ market.
- The company is bringing pharmacy fulfillment in-house (approaching 70% of orders for Rex MD and Shapiro MD). This cuts out the middleman and is expected to lift their profit margins by 150 to 200 basis points. Management also guided that by Q4 2026, they expect an annualized revenue run rate exceeding $250 million and an adjusted EBITDA run rate exceeding $25 million.
- LifeMD’s beta launch of a 30-state virtual cardiology offering is anticipated this month.
- There is a growing industry narrative that Medicare will soon broaden coverage for GLP-1 medications.
- Speculations on M&A interest for the company due to the recent telehealth consolidation.
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.
LFMD – 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.
LFMD – Weekly Chart
#6 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 LFMD is above the price of $4.30.
Target Prices: Our first target is $6.10. If it closes above that level, the second target price is $7.80.
Stop Loss: To limit risk, place a stop loss at $3.20. Note that the stop loss is on a closing basis.
Our target potential upside is 42% to 81%.
For a risk of $1.10, our first target reward is $1.80, and the second target reward is $3.50. 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.
LFMD – Consolidated Statements of Operations
- The GLP-1 telehealth space is highly competitive. The company is competing against heavyweights like Hims & Hers, Ro, and established pharma like Novo Nordisk, and Eli Lilly.
- Corporate Insiders placed Informative Sells of Shares Worth $54.1K in the Last 3 Months.
Insiders | Source: TipRanks.com
- While they are acquiring patients at record speeds, the long-term stickiness of these patients is unproven. If patients cancel their $149/month subscriptions after losing weight, LifeMD’s recurring revenue model will take a hit.
- Despite being a loss-making company, the company executives are being paid significant compensation.
LFMD – 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
