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Investing in penny stocks is a high-risk, high-reward proposition. Generally, stocks with share prices below $5 are defined as penny stocks. For investors with a higher risk appetite who like a bargain, investing in cheap penny stocks can be a tempting way to speculate on potentially outsized returns.
In fact, shares of several big tech companies, including Apple (AAPL) and Amazon (AMZN), were priced below $5 when they first went public on the stock market. That said, penny stocks have also gained a reputation for burning significant investor wealth.
Keeping these factors in mind, let’s see if it makes sense to invest in breakout penny stock Safety Shot (SHOT) right now.
An Overview of Safety Shot
Valued at $99.6 million by market cap, Safety Shot is the first patented beverage globally that reduces blood alcohol content (BAC) and boosts clarity. A wellness and functional beverage company, Safety Shot is engaged in the research and development of OTC (over-the-counter) products and intellectual property.
Its product pipeline includes:
- Photocil - To address psoriasis and vertigo
- JW-700 - To treat hair loss
- JW-500 - A woman-oriented sexual wellness product
- NoStingz - A jellyfish sting prevention sunscreen
- JW-110 - To treat atopic eczema
Previously known as Jupiter Wellness, Safety Shot sells its products through third-party retail stores and channel partners. It also aims to unlock value through the spin-out of its legacy assets from Jupiter Wellness.
In the last 12 months, Safety Shot has reported revenue of $6.83 million with a gross profit of $1.36 million and an operating loss of $11.2 million.
Short Sellers Target SHOT
Shares of Safety Shot have surged over 400% year-to-date, but recently came under pressure after a report from short sellers Capybara Research. In response, Safety Shot released a press statement accusing short sellers of publishing “malicious, defamatory, inaccurate articles” about Safety Shot and its management, forcing investors out of their holdings so they could buy shares at a lower cost and cover short positions.
By the numbers, there are 1.8 million SHOT shares sold short, as of the Oct. 31 reporting period. At the stock's average daily trading volume, it would take more than three days to cover these shorted shares.
A Billion-Dollar Market Opportunity
Safety Shot expects to launch its patented beverage in December 2023 by marketing the product on Amazon. The company has forecast the functional beverage market at $62 billion and aims to gain market share here.
SHOT estimates the hangover remedies market at $1.56 billion, which is expected to grow by 14.6% annually through 2028. Soon after its launch on Amazon, SHOT plans to focus on B2B (business-to-business) sales of its products to distributors, retailers, bars, and restaurants in Q1 of 2024. It seems SHOT is just weeks away from a potential liftoff in revenue growth.
Meanwhile, despite the massive breakout in the share price, there are no analysts offering coverage of Safety Shot. While SHOT is best reserved for those with robust risk appetites for now, any new ratings or legitimate analyst attention from Wall Street could potentially draw some new buyers to the wellness-focused penny stock in the near term.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
