Penny stocks are popular with investors because they offer the potential for multi-bagger returns at a low initial cost of entry. Some of the market's most dominant companies - including Nvidia (NVDA), Apple (AAPL), and Amazon.com (AMZN) - started out as penny stocks, and opportunistic investors frequently scan the under-$5.00 universe of listed equities in hopes of finding the next name that could emerge as a mega-cap industry leader.
Of course, not every promising penny stock turns out to be the next trillion-dollar dynamo, and there's a high risk of losses when speculating in this corner of the market. One indicator that can serve as a bullish signal for investors looking for higher-conviction penny stock picks is insider buying, which is when company insiders - executives, board members, and large shareholders - buy stock with their own money. This often suggests that these well-placed, highly informed investors are expecting the share price to rise, which can lend some confidence to the average investor, as well.
With this in mind, here's one penny stock that recently linked up with a “Magnificent 7” giant on a key partnership - and it seems that company insiders are feeling upbeat about the news.
About Talkspace Stock
Valued at $349 million by market cap, Talkspace (TALK) is a virtual behavior healthcare company based in New York. Founded in 2012, they offer psychological and psychiatric services to their users with the help of more than 5,000 therapists on their platform.
Talkspace’s customers can choose from different health plans, enterprise services, and individual subscriptions. It provides various mental health condition diagnoses through the help of text, video, and audio-based psychotherapy sessions.
TALK is down by 49% from its November 2021 highs, and the stock has shed 21.6% so far in 2024 - underperforming the broader market by a wide margin.
However, the shares have recently regained some ground, and are up by 24% since the lows set in early August, shortly after its quarterly earnings report.
Talkspace Beats on Q2 Revenue
The virtual therapy company reported its second-quarter results on Aug. 6, with revenue up 29% YoY to $46.06 million, better than analysts' $45.41 million estimate. The top-line growth was largely thanks to its payor revenue surging 62%, along with a 20% rise in direct-to-enterprise (DTE) sales. Consumer revenue was down 28% for the period.
Gross profit for the period climbed 18% to $21 million, while gross margins declined from 50% to 45.5% as a result of the shift in revenue mix. The net loss for the period stood at $0.5 million, narrower than last year’s $4.7 million loss, while adjusted EBITDA jumped to $1.2 million, a huge improvement from last year’s loss of $4.0 million. TALK broke even on a per-share basis, in line with estimates.
Talkspace repurchased $8.0 million of common stock under its share repurchase program during Q2, and as of Aug. 1, the board authorized another $25 million worth of buybacks over the next 24 months.
Management reaffirmed their 2024 target for revenue expected in the range of $185 million to $195 million, reflecting a 23%-30% growth rate, while adjusted EBITDA is expected between $4 million and $8 million.
Longer term, analysts expect TALK to achieve GAAP profitability in fiscal year 2025, with the consensus calling for an annual profit of $0.04 per share.
Talkspace Insider Buys the Amazon News
On Sept. 17, Talkspace announced a partnership with Amazon’s health services unit, “to increase awareness and discoverability of its mental health care services” among shoppers on the massive ecommerce platform. Now, when Amazon users search for key phrases like “stress relief” or “family therapy,” they'll be able to check their eligibility for insurance coverage and explore the related offerings from Talkspace.
Investors loved the news, with TALK spiking more than 13% on the day.
Just days after, on Sept. 19, Talkspace Chief Financial Officer Ian Harris bought 70,100 shares at $2.1193 per share, for a total investment of $148,563 in TALK. This marked the first purchase by any TALK insider in almost exactly two years, with the last buy taking place in September 2022, back when the stock traded below $1.00 per share.
CFO Harris now owns nearly 400K shares of TALK, a stake worth nearly 1%.
How Do Analysts Rate TALK Stock?
Wall Street also thinks TALK is a decent buy at current levels. The stock has a consensus “Moderate Buy” rating among analysts, based on two “Strong Buy” ratings and two “Holds.”
The mean price target for TALK is $3.50, implying expected upside of 75% over the next 12 months.
On the date of publication, Ruchi Gupta 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.
