How high could the Woodbois share price go?

Jon Smith admits that there seems to be more room to run for the Woodbois share price, but explains why it’s not for him.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Burst your bubble thumbtack and balloon background

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

At the end of last week, I wrote about the rise and fall of Woodbois (LSE:WBI) shares over the past month. After spiking 100% in a month to 9p, the Woodbois share price had retraced almost all of the move as we started this week. Yet after a couple of strong trading days, it now sits at 6p. Up 8% in a year, what’s the next target for this penny stock?

Reasons for the high interest

Before I discuss potential levels, I think it’s important to understand why the Woodbois share price spiked in the first place. From my point of view, there are a few reasons.

Good Q1 results certainly helped to provide optimism for shareholders, both existing and new. Further, a paid ad claiming 1,000% returns without too much analysis also poured some fuel onto the fire.

Yet the largest reason for the move from my point of view was speculative buying. Speculators could push up the share price so much due to fact that its market capitalisation is very low. In fact, even at 6p, the market cap is only £112m.

What this means is that it doesn’t take a large amount of buying or selling in monetary terms to really cause a shift in the price. Whereas buying a couple of million worth of Apple stock would be a drop in the ocean, buying activity of that size would be noticeable for Woodbois based on the market cap. So once the move higher started, speculative buyers jumping in helped to cause a much larger move higher than normal.

Room to run for the share price

The second spurt seen this week doesn’t seem to be based on any fresh news or information. A partnership announced on Monday with World Forest ID is good, but won’t impact the financial results. Therefore, I think this move is again driven by speculative buyers it think this could move higher in the short term.

In terms of just how high it could go, the first stop would be the level of 9.3p reached earlier in May. Beyond that and there’s blue sky up to 20p, a price that was last hit over five years ago.

In some ways, the fact that the Woodbois share price has been much higher than at present is reassuring. A move upwards isn’t uncharted territory for the stock, which is the case for some other penny stocks. However, at the same time the situation doesn’t fill me with confidence, as I don’t feel any rise is based on strong fundamental factors.

If the company was smashing the ball out of the court with its earnings, expansion and partnerships, I could get on board this sharp rally.

I’ll always stay away from stocks that I think could see their bubble bursting quickly. This isn’t to say that I wouldn’t make money if I bought. But I just don’t feel comfortable buying Woodbois shares based on pure speculation. So the Woodbois share price has room to track a lot higher. But I won’t be investing as I don’t think it’s a sustainable growth stock.


Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jon Smith has no position in any share mentioned. The Motley Fool UK has recommended Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

With a 30% increase since the start of the year, does the Barclays share price still offer good value?

In light of an impressive Barclays share price rally, our writer considers the attractiveness of the bank’s stock relative to…

Read more »

British coins and bank notes scattered on a surface
Investing Articles

How much passive income could we earn from UK shares with just £10 per day?

Even with modest amounts of money to invest, we can still consider investing in the UK stock market to generate…

Read more »

Night Takeoff Of The American Space Shuttle
Investing Articles

3 booming growth shares in the Scottish Mortgage portfolio

Our writer highlights a diverse trio of red-hot shares from the portfolio of Scottish Mortgage Investment Trust. Are any worth…

Read more »

Businessman using pen drawing line for increasing arrow from 2024 to 2025
Investing Articles

2 growth stocks absolutely smashing the FTSE 100

If you think the wider FTSE 100 is having a good year (and it is), check out the gains holders…

Read more »

UK financial background: share prices and stock graph overlaid on an image of the Union Jack
Investing Articles

FTSE 100: next stop 10,000?

As the FTSE 100 briefly hits 9,000 points, investors are already looking forward to when the next 1,000-point level might…

Read more »

Investing Articles

Is Burberry ‘back’ as a solid update drives its shares to 17-month highs?

Burberry shares have risen by more than 60% since May's forecast-beating financials. Can the FTSE 250 luxury giant keep rising?

Read more »

Two gay men are walking through a Victorian shopping arcade
Investing Articles

The Burberry share price continues to rise despite falling sales!

Our writer looks at how the Burberry share price responded to the company’s first-quarter trading update, which was released earlier…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

What a crazy day for the share price of this FTSE 250 retailer!

Our writer’s taken time to digest the latest results of the FTSE 250’s Frasers Group. And he likes what he…

Read more »