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: Unisys Corporation (NYSE: UIS)
Today’s penny stock pick is the information technology solutions company, Unisys Corporation (NYSE: UIS).
Unisys Corporation operates as an information technology solutions company in the United States, the United Kingdom, and internationally. It operates in three segments: Digital Workplace Solutions (DWS); Cloud, Applications & Infrastructure Solutions (CA&I); and Enterprise Computing Solutions (ECS). The DWS segment provides workplace solutions, such as intelligent workplace services, unified experience management, modern device management, workplace as a service, and seamless collaboration.
Its CA&I segment offers cloud services, cloud artificial intelligence services, application services, data services, and cybersecurity solutions; and digital transformation in the areas of cloud migration and management, applications and infrastructure transformation, and modernization solutions. The ECS segment provides license and support solutions, such as ClearPath Forward which provides a secure and scalable operating environment for high-intensity enterprise computing; and specialized services, next-generation computing, and industry solutions. It also offers various micro-market and business process solutions. The company serves the financial services, travel and transportation, telecommunications, and healthcare industries; state, local, and non-U.S. government agencies; and not-for-profit organizations.
Website: https://www.unisys.com/
Latest 10-k report: https://ir.unisys.com/static-files/d5066cf7-87c7-4549-9963-bc7bdcc80f72
Analyst Consensus: As per TipRanks Analytics, based on 3 Wall Street analysts offering 12-month price targets for UIS in the last 3 months, the stock has an average price target of $7.25, which is nearly 49% upside from current levels.
Analysts | Source: TipRanks.com
Potential Catalysts / Reasons for the Hype:
- The company unveiled three new cloud AI solutions under its Cloud, Applications & Infrastructure (CA&I) business unit. These cloud AI offerings, Cloud AI Foundation, Enablement, and Customer Experience, are aimed at enhancing enterprise AI integration and customer interactions.
- The company’s cash flow improved to $23M, up $11M year-over-year, indicating better operational efficiency.
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 from the falling wedge pattern. Once the stock breaks out of the falling wedge pattern, it could move higher.
UIS – 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 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 dotted line. This looks like a good area for the stock to move higher.
UIS – Weekly Chart
#6 Bullish Stoch: The %K line is above the %D line of the stochastic in the weekly chart and is also moving higher from oversold levels, indicating possible bullishness.
Recommended Trade (based on the charts)
Buy Levels: If you want to get in on this trade, the ideal buy level for UIS is above the price of $5.00.
Target Prices: Our first target is $6.00. If it closes above that level, the second target price is $7.00.
Stop Loss: To limit risk, place a stop loss at $4.40. Note that the stop loss is on a closing basis.
Our target potential upside is 20% to 40%.
For a risk of $0.60, our first target reward is $1.00, and the second target reward is $2.00. 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:
- The company has a history of net losses.
UIS – Consolidated Statements of Operations
- The company has a history of legal proceedings.
- The company’s Brazilian operations are involved in various litigation matters, including numerous governmental assessments related to indirect and other taxes, as well as disputes associated with former employees and contract labor.
- UIS had received voluntary requests for information and documents from the SEC relating to the company’s policies, procedures and disclosures in connection with cybersecurity incidents.
- On October 22, 2024, Unisys reached a non-scienter based administrative proceeding settlement, on a neither admit nor deny basis, with the SEC in connection with the investigation.
- On December 3, 2024, Unisys reached a settlement in the case of Unisys Corp. v. Gilbert, et al. pending in the Eastern District of Pennsylvania. The litigation sought damages from Atos, a competitor, and former employees, alleging theft of Unisys trade secrets and confidential information.
- The company has an estimated environmental liability for a site that its predecessor company previously operated. As of December 31, 2024, the related liability totaled approximately $24 million.
- Hedge Funds Decreased Holdings by 320.5K Shares Last Quarter.
Hedge Funds | Source: TipRanks.com
- Approximately 57% of the company’s total revenue for 2024 was derived from international operations. This makes it susceptible to being adversely affected by volatile, negative, or uncertain economic, geopolitical, or political conditions as well as acts of war, terrorism, natural disasters, or the widespread outbreak of infectious diseases.
- Despite being a loss-making company, the executives are being paid millions as compensation.
UIS – 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
