Penny stocks are low-priced stocks that trade at less than $5 per share. These stocks can be attractive for anyone looking for high-risk, high-reward opportunities. However, investing in penny stocks can be very risky. They are often thinly traded and may lack the regulatory oversight of more established companies. As a result, it’s important to stay informed about the latest news and trends in the market. That’s important when deciding which companies to watch and which penny stocks to buy.Click Here To Watch TTG Live On YouTube
One of the main reasons why news is important is because it can provide valuable information about a company’s financial health. This includes updates on earnings, new product launches, mergers and acquisitions, and other key financial metrics.
For example, suppose a company announces signing a significant new contract. In that case, this can be a positive signal that the company is experiencing growth and may be a good investment opportunity. Similarly, if a company announces a significant setback, such as a failed clinical trial or a lawsuit, this can be a negative signal to the market.
Penny Stocks & News: Why Does It Matter?
News can also provide insights into broader trends in the market, such as shifts in consumer preferences or changes in government regulations. For example, if a news report suggests that the demand for renewable energy is increasing, this can be a positive signal for penny stocks in the renewable energy sector.
Another reason news is important is it can help investors stay informed about broader economic trends. This includes updates on interest rates, inflation, and other economic indicators that can impact the stock market. For example, if the Federal Reserve announces that it plans to raise interest rates, it can lead to a broader sell-off in the stock market. Investors who stay informed about these developments are better equipped to make informed decisions.
Finally, news can also provide insights into broader social and political trends. These can also impact the market. For example, if a major political scandal breaks out, this can lead to more general uncertainty in the market. Similarly, if a natural disaster occurs, this can have a significant impact on specific sectors of the market. Investors who stay informed about these developments are better equipped to decide when to buy or sell penny stocks.
Penny Stocks To Watch
Tritium DCFC (DCFC)
Shares of Tritum DCFC stock have been on our watch list early in 2023. The company has been in the news on multiple occasions, and the last time we discussed it, Tritium had just announced securing its most significant order in company history. The order came from BP (NYSE:BP) in its efforts to accelerate the deployment of EV chargers. It also announced that it delivered its first fast chargers to UK charging network provider, evyve.
Tritium gave initial 2022 performance expectations. These included sales anticipated between $95 million and $102 million. It’s also expecting fiscal 2023 sales in excess of $200 million.
This week Tritium gave several updates, including selling more than 300 EV fast chargers to a Danish fuel retailer, OK. In addition, while other companies are slashing jobs, Tritium announced it would add more than 250 to its workforce in Tennessee. At peak capacity, the facility is expected to produce up to 30,000 units annually.
Jasper Therapeutics Inc. (JSPR)
Biotechnology stocks have been some of the most active and volatile to watch in the stock market this year. Jasper Therapeutics, one of the best value stocks, is one of the names to have observed since 2023 began. The company kicked things off with a huge move in January after announcing positive clinical data. The stem cell therapy company reported Phase I/II trial results from its briquilimab in treating sickle cell disease and beta-thalassemia. Since then, the stock has been consolidating in a tight channel between $1.65 and $2.
JSPR Stock News
This week Jasper announced that it presents data supporting its ongoing briquilimab development. CEO Ronald Martell explained, “As we focus the development of briquilimab on treating chronic mast cell diseases and as a conditioning agent for stem cell transplants addressing rare diseases, we believe that the data presented at the Transplantation & Cellular Therapy Meetings of ASTCT and CIBMTR provides the additional mechanistic and clinical proof-of-concept rationale for its mechanism of targeting c-Kit.”
Considering the meeting is being held this week through February 19th, it could be important timing if JSPR stock is on your watch list this week.
Eos Energy Enterprises Inc. (EOSE)
Energy stocks have also been on the radar lately. Eos Energy, as one of the best growth stocks, is a name that steadily climbed higher this week. Earlier this month, the energy storage platform developer provided a business update and gave guidance on its revenue outlook for fiscal 2022 results. Revenue was expected between $17 million and $20 million, with 2023’s outlook between $30 million and $50 million. Eos also reported that it received an order for a 47MWh initial renewables plus storage project with “with one of the largest operators of energy storage in the US.”
EOSE Stock News
According to the latest data of the short interest api, the market this week got the official timing on when it will receive the final figures for 2022. The energy company releases its Q4 and full-year on February 28th after the closing bell. If EOSE stock is on your watch list, keep that in mind.
EBET Inc. (EBET)/SharpLink Gaming Ltd. (SBET)
Shares of sports betting stocks haven’t performed as well as some may have hoped over the last year. EBET is an example of that. However, recent market activity says otherwise. Earlier this quarter, EBET stock exploded higher just before the company announced a $6.5 million financing round.
The company operates and develops wagering products for bettors and caters to the millennial and Gen-Z demographics. As discussed earlier, the news doesn’t have to be from a company to make a splash and that may be what is going on with EBET stock at the end of the week.
SharpLink, on the other hand, focuses on sports betting and iGaming with free-to-play and mobile platform offerings. According to the company, SharpLink’s proprietary fantasy sports platform reaches more than two million fantasy sports fans who spend almost $40 million annually on its portfolio of digital gaming experiences and contests.
EBET/SBET Stock News
In this case, industry-related headlines have brought some sympathy sentiment to betting stocks. DraftKings (NASDAQ: DKNG), a market leader in the space, announced better-than-expected Q4 results. It also raised its 2023 guidance, which brought more optimism to the sports betting and wagering industry-related stocks.
This includes other micro-cap stocks like SharpLink Gaming Ltd, a popular Fintwit stock a few weeks ago. Since this is more sympathy-related and not specific to EBET, it will be interesting to see if there is any follow-through momentum in the market in the near term.
In the Summer of 2021 it’s a bit startling to see how quickly some biotech stocks can surge with high-volume in a single day. Case in point, NanoVibronix $NAOV.
In what was essentially a 250% increase, it went from $0.72 to $2.61, after hours up another 9%.
The company has a new device a UroShield that impacts the reduction and incidence of urinary tract infections and the pain and discomfort caused by urinary catheters. News in a study shot up the stock late Friday afternoon.
Based on the data of short interest API, the short volume was nearly meme-stock inspired. Get this, volume of 58.8 million shares compared with the full-day average of about 204,000 shares.
With that kind of volume $NOAV is likely to keep going up into next week, making it a potential meme stock for the quick profit momentum gamblers.
While the news is positive, it’s hard to see how the stock price increase of so radical a nature is justified. The company said “The Journal of Medical & Surgical Urology” is publishing an article with “overwhelmingly positive” findings from a study of patients that used its UroShield product in real world settings. “As we would expect, the patient experiences in the study were statistically significant, with all responding patients reporting that our device was simple, easy to use and materially benefitted them,” said NanoVibronix Chief Executive Brian Murphy.
With that much volume it’s unlikely to have reached its short-term zenith on the news as many traders weren’t around on Friday PM to catch the trade.
The company said the peer-reviewed publication has been submitted to the National Institute for Clinical Excellence.
With penny stocks very beaten down since February highs, news is more dramatic at the intersection of biotech and meme-like momentum in volume.
Exela is keeping up its momentum today, with another 10% so far with 10x the usual volume according to Yahoo Finance.
The company is also quickly becoming a short-squeeze candidate as bears and bulls both get on this name. There is resistance at both the $3.70 and $4.50 levels so it’s unclear if this can go much higher.
The WSB subreddit is alive today with traders talking upXELA stock. All of this extra attention has the company’s shares seeing extra trading yet again today. That sort of building enthusiasm could take the stock much higher for a meme stock rally.
There’s now a 70% chance of this occuring. $XELA is still only at $3.60.
Xela Technologies Multi-Day Runner
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Xela ticker $XELA is up 110% in the last month. Could it be the next $MRIN meme stock? There’s an increase in volume and a battle between bulls and bears that suggests it could be, as I mentioned a few days ago.
Yesterday the stock was up another 23%, mostly with a surge in power hour.
After doing an offering of $100 million at the end of June, Xela Tech’s financial situation is much clearer and more promising. $85 million was raised under the $150 million at-the-market equity program launched on June 30, 2021. So now what?
$XELA appears to be trending on meme boards and WSB type traffic in the first week of July, which is 60% likely to be a multi-day runner. The stock was $1.28 on June 18th, and today is $3.29. That’s quite some momentum for a stock whose volatility usually disappoints. But it’s now entering a volume of meme-stock mania.
Xela has room to operate now with $205 million of cash and cash equivalents on hand as of June 30, 2021, not including additional borrowing availability under various credit facilities. They have a new lucrative RPA client in the Healthcare Insurance industry. At a time when the Russell 2000 is under pressure, there are few decent penny stocks to choose from this summer.
Xela has the kind of chart that’s also favored among meme stock pickers. It used to have a huge stock price. This is the $MRIN type of movement. $MRIN so such absurd gains as to inherit the $MVIS trophy for top meme penny stock.
Exela Tech Is As Close to a Value Stock in Micro Cap As You Will Find
According to the data from short interest api, Exela Tech is also likely a beneficiary of the economic recovery. They have a digital foundation in their engineering heritage that powers typically long tenured customer relationships and this is what enables them to continue to innovate and launch new disruptive solutions that further widen their competitive moat, so they claim.
The truth is if this has entered meme stock territory, it doesn’t really matter how much they can regain revenue or how fast.
Xela Tech’s long term finances are also improving. The company plans to use certain proceeds from the equity program to strategically reduce its debt and associated interest expense obligations as well as explore ways to invest in its growth, in line with their previously announced strategic initiatives.
As an initial step, Exela intends to target an annual debt service reduction of $25 million. More offerings are very possible given the multi-year beaten down vibe this company has.
However the late June offering just seemed to delay the inevitable surge of $XELA’s stock. It seems primed for upside also since it has significant bearish action, where a short squeeze is a bit more probable.
We’ve been watching $XELA for about the past 1.5 years, and frankly its new found higher liquidity will likely help it better leverage the already diversified tech pipeline and further enable its business services model by allowing it to fund new growth and revenue streams.
Whether you are looking at fundamentals or meme potential, $XELA has the kind of volatility that’s good for July 2021. I would say $5.50 is a realistic price target for Xela as a peak in July. However expect volatility and a lot of bear vs. bull action.
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Backblaze makes data storage easy, safe and convenient. Backblaze is a leading cloud platform focused on data storage only. The company is primarily focused on serving the mid-tier and lower-tier markets.
Backblaze offers two core products:
Computer backup for backing up personal laptops and desktops
On-demand storage for developers to build applications and IT people to back up organization systems and files
According to the company website: “Backblaze makes storing, using, and protecting data astonishingly easy.” Backblaze is a play on the cloud computing market but is focused specifically on disrupting the Storage-as-a-service market within the industry. The amount of data being created is growing rapidly. It is important to remember that behind every application, the data behind the application is stored somewhere which has affected its stock price in Excel.
The public cloud infrastucture-as-a-service storage is a large market. According to a report from IDC, the public cloud IaaS storage market will reach $91 billion by 2025, of which 60% of spend will come from mid-market sized businesses:
Source: BackBlaze Investor Presentation
The large, diversified cloud providers: Amazon, Microsoft and Google who has great DCF valuation and impressive intrinsic value, all offer many cloud computer services including storage. Backblaze distinguishes itself by being an independent cloud platform focused only on data storage.
Within the major elements of the cloud computing tech stack: networking, compute, communication and storage, independent cloud platforms have emerged over the years despite strong competition from the large cloud providers. Backblaze unabashedly compares itself to major independent cloud companies like Cloudflare and Twilio, whose market caps are approximately 60x and 50x larger:
Source: BackBlaze Investor Presentation
What Problem is Backblaze Solving?
According to the CEO Gleb Budman, the idea to start the company came about when the cofounders realized that everything was going digital and no one was focused on making the management of that data easy.
Backblaze solves a number of problems for SMBs and individuals looking to store their data. Backblaze specifically targets these markets for a number of reasons. At a high level Backblaze distinguishes itself from the competition by offering:
Simplicity
Affordability
Neutrality
At their core, besides their high stock price in Excel, large cloud providers like AWS, Azure and Google Cloud Platform are designed to tackle complex use cases at the enterprise level. SMBs and individuals need a simpler storage platform designed for them:
Source: BackBlaze Investor Presentation
The large cloud providers are not only complex, but they are demonstrably more expensive. Backblaze’s storage rate $/GB/month of $0.005 is 1/4 the cost of Amazon S3 at $0.021. The download rate is also significantly cheaper at $0.01 $/GB (and is sometimes even free, more on this later in the article):
Affordability is also an issue in terms of dowloading data has become a hot button in the industry. Egress fees, or data transfer (bandwith) pricing, refers to money paid to send data to external networks. Many cloud companies make it free to input data but charge fees to discourage. AWS in particular has been accused of this practice. Cloudflare CEO Matthew Prince openly criticized AWS on Twitter about this topic:
In the above tweet, Prince embedded a scathing article on Cloudflare’s blog written by Prince and a colleague. The blog post accused Amazon of charging huge markups to transfer data ranging anywhere from 3.5x Amazon’s cost in South Korea to 80x their cost in the U.S. and Europe:
Egress fees not only lead to high cloud bills, but they are difficult to predict. Cloud computing enables a company to scale quickly, and if suddenly a company experiences massive growth, a massive bill may shortly follow due to high egress fees. Backblaze provides a great case study of how they helped a gaming company, Nodecraft, that experienced this very problem.
Nodecraft is a multiplayer gaming service known for offering fair, fixed prices. Nodecraft built their game distribution on Cloudflare’s cloud network platform and stored game and server files on Amazon S3. Nodecraft launched a new product that allowed customers to play multiple games from their hosted servers. It was a tremendous success but ironically hurt the company financially. Customers were able to play and store multiple games on Nodecraft’s hosting servers. Nodecraft’s storage costs were increasing because game swapping created more data files to store for each customer. Nodecraft’s egress fees simultaneously were increasing because customers were accessing saved version of their games.
This was clearly not sustainable, so Nodecraft ultimately decided to partner with Backblaze. Not only are Backblaze’s storage costs 1/4 the cost of Amazon S3, but Backblaze did charge any egress fees since the company is a member of the Bandwith Alliance. The Bandwith Alliance, founded by Cloudflare, is comprised of a group of companies that are committed to lowering or eliminating egress fees. Nodecraft’s decision to partner with Backblaze resulted in savings of 85%!
Lastly, more companies are choosing to work with more than one cloud provider. One of the reasons companies chose a multi-cloud approach is to avoid vendor lock-in, or the fear that a company will be unable to use another vendor without substantial switching costs or operational impact. Another reason is that companies are increasingly needing multiple clouds for regulatory, compliance, insurance and data resiliency reasons. Backblaze links to a survey conducted by IDG, stating that more 55% of organizations currently use multiple public clouds and 21% saying they use three or more. Companies can securely store their data with Backblaze and run their applications on the cloud provider of their choosing.
Putting it all together Backblaze is easy to use, demonstrably cheaper, trusworthy and will not compete with you:
Source: BackBlaze Investor Presentation
How Does The Business Model Work?
Backblaze offers two cloud services:
Computer Backup – backup for businesses and personal laptops and desktops
B2 Cloud Storage – on-demand storage for developers to build applications and IT people to back up organization systems and files
Computer Backup is the first business line created 15 years ago and represents 2/3 of their business. Computer Backup is a simple business model. Backblaze charges a flat fee of $7/month (or $70/year) for unlimited backup of personal computers.
B2 Cloud Storage (also referred to as B2), created only 5 years ago, represents the remaining 1/3 of the business and is the “hypergrowth jewel”. B2 was designed for developers and IT people requiring on-demand storage. B2 is easily scalable and cheaper than the large cloud providers. As mentioned above, all web/mobile applications require behind-the-scenes data storage.
B2, while accounting for less revenue presently, has better operating metrics including a higher NRR (Net Retention Ratio) at 130% and higher ARPU (Average Revenue Per User) of $325.
Source: BackBlaze Investor Presentation
The company has publicly stated that B2 will be the overall growth driver for Backblaze. There are several reasons for this:
On-demand cloud storage market is larger and growing faster than the computer backup market
B2 charges on a consumption basis while Computer Backup charges a flat fee
Rollout and upsell of new product Cloud Replication which enables customers to keep data in multiple regions.
The main growth drivers for both businesses are highlighed below.
Source: BackBlaze Investor Presentation
Looking at its stock price in Google Sheets, CEO Budman states that there are 13,500 customers currently utilizing both services on their ‘Storage Cloud’. Total storage under management is currently ~2 exabytes. Altogether the company currently has 200,000 hard drives in 5 data centers spread across regions.
Source: BackBlaze Investor Presentation
Partnerships
Backblaze has developer partners and alliance partners. Developer partners work together to help developers build applications and alliance partners utilize Backblaze to send and store data.
As discussed above, Backblaze is a member of the Bandwith Alliance and one of Backblaze’s developer partners:
Source: BackBlaze Investor Presentation
Cloudflare CEO Matthew Prince appeared in the Backblaze roadshow to discuss their partnership. Prince reiterates a number key points made by CEO Glubman about Backblaze’s advantages:
Backblaze provides consistently reliable storage that is incredibly affordable for any of their customers to use.
Large cloud providers have many different businesses. If you are a customer don’t know if data being used against you.
Backblaze is independent cloud. You pay them reasonable rate for services, and they will not compete against you some day. Big cloud providers make it easy to check in data but getting data out is not easy
CEO Gleb Budman is one of five co-founders of Backblaze. This group has worked together for 20 years and successfully exited 2 prior tech companies. Budman is 46 years of age, so it is impressive to have already successfully exited prior companies and remain interested in building somethign new. CTO Brian Wilson also worked with Budman at the two previous tech companies and also has experience working for Apple.
The company receives a a really high Glassdoor rating of 4.9/5.0 stars. CEO Budman receives 100% approaval rating as CEO. Backblaze was also recognized as a gret place to work according to Inc. Best Workplaces, Inc., 2021.
It is great to see that the co-founders all remain in senior leadership positions at the company and that they have a history of shared success. Also interesting to note is that the company was also almost entirely bootsrapped. Backblaze only took in <$3 million in outside equity investment before going public.
Competition
Backblaze breaks down its competition as falling into 3 categories:
Diversified public cloud companies like AWS, Google Clould Platform and Azure
Legacy on-premise storage vendors like Dell EMC
Smaller clould storage competitors
The competition with B2 against the major cloud companies was largely covered above. Backblaze is targeting mid-market companies requiring simpler simpler solutions. Additionally, companies are increasingly pursuing a multi-cloud strategy for regulatory and compliance reasons, which should be a tailwind for Backblaze.
Interestingly, Cloudflare, a developer partner and IPO roadshow promoter with high stock price in Excel, recently launched Cloudflare R2 Storage, a storage service aimed at eliminating egress bandwith fees. Cloudflare announced that it will charge $0.015 $/GB/month, which is still 3x more expensive than Backblaze. This puts Cloudflare in direct competition Backblaze. Tech companies, particularly larger ones, often become “frenemies” and encroach on each other’s turf while still remaining partners. According to Prince, Cloudflare is trying to compete against Amazon rather than competing against smaller players like Backblaze.
In the personal backup market, Backblaze competes with popular services like Dropbox, Google Drive and Apple iCloud. Wirecutter, a product review website owned by The NY Times, recently reviewed storage backup providers and ranked Backblaze as the best option. Backblaze notes that compared to Google Drive, Backblaze is not only cheaper but they offer additional features such as data recovery by mail and private encryption key.
There are several smaller clould storage companies that compete against B2 such as Wasabi. Wasabi has raised $224 million in total financing as of May 2021 and was named one of ‘The 20 Coolest Tech Startups of 2020’ by CRN. Wasabi notably does not charge egress fees, while Backblaze does charge egress fees unless their customer uses a compute or CDN partner that is part of the Bandwith Alliance. Wasabi appears to be one of B2’s most direct competitors in terms of target market, product offering and pricing.
Financials & Growth
From the best investing websites, the company emphasizes that it has 3 characeristics that make it a good long term bsuiness:
Almost all revenue is recurring
Product shift to B2 Cloud Storage
Strong customer retention.
As of the most recent quarter Q2 2021, ARR was $65 million the combined NRR was 110%. Revenue grew 32% in FY 2020:
Source: BackBlaze Investor Presentation
CFO Frank Patchel stated that Q2 2021 revenue growth appears weak due to an unfavorable comparison from the previous year that coincided with a price increase in Computer Backup. This unfavorable comparison will reverse starting in Q1 2022 and growth should accelerate for at least the next two years.
For the first half of 2021 revenue grew 24% YoY, a decline of 800 basis points compared to the 32% growth witnessed in FY 2020. Breaking out the revenue contributions between B2 and Computer Backup in H1 2021, one can see that B2 is growing much faster and supports the narrative from management that B2 is where the future is headed:
Margins took a hit in H1 2021. While Adj. Gross margin, which excludes stock-based compensation and D&A, remained stable, Adj. EBITDA margin was noticeably weaker due to increased investments investments and fees to prepare for IPO in 1H 2021:
Source: BackBlaze Investor Presentation
The CFO also highlighted that growth has been very consistent in dollars spent per customer and number of customers served. This number of dollars spent her customer has increased 45% between Q1 2019 and Q1 2021 due to growth in data stored in B2 and Computer Backup, upselling and price increases. The number of total customers is up 90,000 during this time frame:
Source: BackBlaze Investor Presentation
Backblaze prides itself on an efficient go-to-market sales model with over 80% of their revenue in 2020 coming from self-serve customers, or customers who simply sign up online without speaking to a sales rep (sales reps handle the remaining 20% of deals that are typically much larger). Thus it is highly regarded by the best stock research websites.
Conclusion
According to form 8k, Backblaze as a whole is not is not experiencing hypergrowth, but B2 is experiencing rapid growth. Investors are buying shares in Backblaze for exposure to B2 and growth in storage-as-a-service. Below is the chart showed earlier comparing the growth and certain metrics of each segment. The 130% NRR is particularly encouraging given that management argues that B2 is the future of the company. The upcoming launch of Cloud Replication, which enables customers to keep data in multiple regions, along with the growth of data in general, will hopefully help to increase ARPU over time:
Source: BackBlaze Investor Presentation
Historically, data storage companies have not performed well – just look at the stock performance of Box (dark blue line) and Dropbox (light blue line) compared to the Nasdaq (purple line):
Source: Yahoo Finance
Is Backblaze’s product truly differentiated to sustain long term growth rates? Fortunately, as noted above, the public cloud IaaS storage market is large and mid-market companies will account for a good chunk of that. Backblaze has this tailwind behind it along with the rise in businesses adopting multi-cloud strategies. The public cloud IaaS storage market is large enough for many players to be successful.
There is some speculation that the large cloud providers might get rid of egress fees, which may lower Backblaze’s value proposition. Backblaze currently charges much lower egress fees as noted above and is already part of the Bandwith Alliance so presumably many of their customers do not pay any egress fees already. Backblaze is part of a trend of independent cloud companies that continue to nip at the heels of the major cloud providers. The question is will Backblaze have a differentiated enough product to sustain their growth. So far it appears yes based on their steady growth in dollars spent per customer and increase in total customers. Backblaze has customers in 175 countries which indicates that there is global demand for their product.
According to its 13f filings, Backblaze management notes that customers on average have grown their spend more than 2x since being onboarded:
Source: BackBlaze Investor Presentation
The company is not profitable as it continues to invest for growth. GAAP gross margin was 50%; this is noticeably less than the 75% Adj. gross margin that management touts achieving in FY 2020 and 1H 20201. On a TTM basis, operating margin was (17%) and negative net margins was (19%). Again the Adj. EBITDA margin varied considerably from the GAAP reported measure:
Operating cash flows for the last 12 months were positive at $8.4m. Free cash flow was negative at ($539k) and FCF margin was (1%):
Backblaze leases and maintains data centers so the company will never achieve high gross margins on a GAAP basis like other top SaaS companies. The biggest driver of the difference between GAAP and Non-GAAP margins is capex depreciation, which is a non-cash expense:
Source: BackBlaze Investor Presentation
Today Backblaze’s market cap sits at ~$784 million. With TTM revenues of ~$60 million this puts the TTM P/S ratio at 13x. This is not a company that will ever sport high gross margins like Datadog or Zscaler, and the fastest growing part of the business only accounts for 1/3 of ARR. Backblaze will report it’s first quarter as a public company on 12/13/2021. There are not many independent, publicly traded companies focused solely on data storage, which is a crucial part of the tech stack. The cloud does not exist without data being stored somewhere. B2 appears poised for rapid growth as more companies seek alternatives to the major clould providers and the company addresses unfulfilled demand in the mid-tier market. As the company continues to grow hopefully its earnings reports will show continued growth in B2 to justify the valuation.
