We recently compiled a list of the 10 Best New Penny Stocks To Buy Now. In this article, we are going to take a look at where Shimmick Corporation (NASDAQ:SHIM) stands against the other new penny stocks.
Fears of a US recession are growing, sending stock markets down, and investors around the world are on edge. The US Bureau of Labor Statistics (BLS) released July job figures that were worse than anticipated, revealing only 114,000 new jobs generated in July compared to the predicted 175,000. These data alarmed investors, as did the disappointing latest earnings from tech giants. As a result, the manufacturing industry in the US had an eight-month low in activity and the unemployment rate reached a three-year high of 4.3% due to a decline in new contracts.
Monday was the worst day for Wall Street in nearly two years as key indexes fell on worries about a US recession. The average of the 500 largest publicly traded companies plummeted 3% to 5,186.33. However, the 500 large companies are still up more than 10% for the year.
Chris Weston, of the US online stockbroker Pepperstone, said global markets were “at a truly important juncture”. “What really matters now is whether money managers and traders feel sentiment has become too pessimistic, or if this deleveraging and risk aversion manifests into even higher volatility and drawdown.
Opinions among analysts regarding the gravity of the problem differ. James St Aubin, chief investment officer at Ocean Park Asset Management, “We’re witnessing the fallout from the curse of high expectations,”, while Art Hogan, chief market strategist at B. Riley Wealth, said that markets may be overreacting. He stated:
“This isn’t a Category 3 hurricane, but we are seeing how markets react to signs that the economy is normalising after turning hot in the first half of this year.” “Markets can find themselves overreacting and investors [latch] on to anything as an excuse to take profits.”
The 500 large companies have gained more than 15% this year, despite recent setbacks.
The market’s anxiety may be heightened by the possibility that fewer initial public offerings (IPOs) might take place this year. However, 154 IPOs were listed on the US stock market in 2023, but this was 85% fewer than the record-breaking 1,035 IPOs in 2021 and 15% fewer than the 181 IPOs in 2022, 82.5% fewer than in 2021. IPOs totaling 6,203 have occurred between 2000 and 2024. 2009 had the fewest, with just 62. With 1035 IPOs in total, 2021 established an all-time record, surpassing the previous high of 480 in 2020.
George Chan, EY Global IPO Leader, says:
“As 2024 unfolds, participants in the IPO market are entering uncharted territory. IPO candidates are influenced by the recent pivot in investors’ preference toward proven profitability in an altered interest rate landscape, and are doing this while facing the intricate dynamics of an intensified geopolitical climate and the buzz around AI. To succeed in this shifting environment, IPO prospects must remain flexible and prepared to seize the right moment for their public debuts.”
Recent data from EY Global IPO Trends Q2 2024 show that in 2024, the US IPO markets saw a strong start that increased global proceeds. On the other hand, the Asia-Pacific area had a poor start, which affected the worldwide volume overall. In the first half of 2024, the industrials (21%), technology (19%), and materials (11%) markets led the way in global IPO issuance, with India dominating in terms of deal volume. Meanwhile, the technology (21%), health and life sciences (17%), and industrials (15%) markets topped the IPO proceeds rankings, with the US attracting the lion’s share of these sectors. As the home to many of the world’s leading technology and healthcare companies, the US has a strong ecosystem for startups. Driven by favorable market conditions, expectation of interest rate cuts, and innovations in artificial intelligence (AI), IPO deal values have skyrocketed in both these markets. Moreover, a handful of large deals contributed to a 67% increase in proceeds from IPOs in the US in the first half of 2024.
Methodology:
In this article, we first used a stock screener to list down all stocks trading under $5 (as of the writing of this article) with high institutional ownership. We have limited our selection to stocks that went IPO over the past year. From the resultant dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 920 hedge funds in Q1 2024 to gauge hedge fund sentiment for stocks. We have used the stocks’ market cap as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
Aerial view of a water distribution system’s infrastructure in a major city.
Shimmick Corporation (NASDAQ:SHIM)
Number of Hedge Fund Investors: 3
Market Cap: $121.71 million
In the US, Shimmick Corporation (NASDAQ:SHIM) offers essential infrastructure solutions, including water. The company works on projects related to mass transit, bridges, and military infrastructure. It also works on water and wastewater treatment infrastructure, water storage, and conveyance, including dams, levees, flood control systems, pump stations, and coastal protection infrastructure.
SHIM is one of the Best New Penny Stocks To Buy Now. The company made its IPO on November 17, 2023. As of the end of the first quarter of 2024, 3 hedge funds out of the 920 funds reported having stakes in SHIM.
SHIM’s stock price dropped by 43.34% due to a weak Q1 2024 earnings report. Roth/MKM analyst also maintained a Neutral rating but lowered its price objective from $9.00 to $3.50 in May, changing its perspective on the construction firm. This choice was made in response to Shimmick Corp’s first-quarter earnings announcement, which were much below projections. The company’s revolving credit facility had covenant clauses broken as a result of the underwhelming financial performance, which also caused a delay in the 10-Q report’s release.
The Roth/MKM analyst pointed out that even while there is a robust market for projects involving water, the problems with legacy projects that AECOM left behind are turning out to be more complicated than first thought. The company has responded to this by taking a more cautious approach, delaying its decision to change course until it sees more definitive evidence of better execution and cost control on key AECOM projects.
Investors are becoming more concerned about Shimmick Corp’s capacity to control expenses and complete projects successfully in light of the company’s recent difficulties. The company’s present financial difficulty has been highlighted in particular by the credit agreement breach.
In the upcoming time frame, investors will probably be intently monitoring the company’s stock performance as they search for signs of Shimmick Corp’s operational modifications and approaches to resolve the problems raised by Roth/MKM.
The way the market reacts to these events will indicate how investors feel about the company’s ability to get through its current problems. Shimmick Corp is still being watched closely as it works to overcome its operational issues and get back on solid financial footing.
However, 2 analysts have given Shimmick Corporation (NASDAQ:SHIM) a “buy” rating. The average Wall Street analyst price target for SHIM is $6.50, which presents a 64.97% upside potential from the current price of $3.94.
Overall SHIM ranks 8th on our list of the best new penny stocks to buy. While we acknowledge the potential of SHIM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SHIM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These 10 Stocks in June.
Disclosure: None. This article is originally published at Insider Monkey.
