In late September, you could have purchased shares in Bionano Genomics (NASDAQ:BNGO) for a mere 27 cents a share. The company had been mostly marginalized on Wall Street. But things would suddenly change in a very big way. BNGO stock would go on to soar to a high of $15.69.
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True, over the past couple weeks, the shares have started to cool off. But they are still at high levels, with BNGO stock fetching $8.55 and the market capitalization at $2.3 billion.
Of course, a key reason for this move has been the impact of a Reddit forum. This powerful group of investors has been targeting out-of-favor stocks – especially those with heavy short positions – like GameStop (NYSE:GME) and AMC (NYSE:AMC). In fact, some of these stocks had been on the verge of being delisted.
OK then, now what for BNGO stock? What are the prospects? Could there still be an opportunity here? Well, let’s take a look.
Han Cao founded Bionano Genomics in 2003. He had worked on the initial technology when he was a professor at Princeton University. Note that his project had the backing of U.S. Defense Advanced Research Projects Agency (DARPA). Cao’s main innovation was the development of a core single molecule for genome analysis.
While at Bionano, he would leverage this technology in creating the Saphyr system. It essentially allows for imaging the genome at high speeds and precision. The system has been used to help with ALS, Autism Spectrum Disorder (ASD), leukemia and Alzheimer’s disease.
One of the most recent positive developments for the Saphyr system was with the mapping of cancer. In a clinical study, there was the ability to detect structural variation of 20 solid tumor samples – such as for colon, breast, brain, bladder, kidney and so on – even when there was low abundance. In other words, this may allow for more personalized treatments.
Even though Bionano Genomics has developed cutting-edge technology, the company has had challenges in getting adoption. In the latest quarter, revenues came to only $2.2 million and was down by 33.7% on a year-over-year basis. The main reason for the drop-off was the change in the mix of revenues for instrument sales and reagent rentals.
Although, as for this year, it does look like revenues should get back on track. The consensus from Wall Street is that they will hit $18 million.
But when compared to the hefty market capitalization of BNGO stock, this is really not too impressive. The major issue for the company is whether Saphyr system is a must-have. That is, might health care organizations be content with older and proven approaches – even if they are not necessarily as fast or efficient?
It’s tough to tell. Although, in light of the low sales levels, it does seem that Bionano Genomics will have a challenge in getting traction.
There is certainly much promise for gene editing. And as for Bionano Genomics, it has an innovative system.
Wall Street is also encouraged. According to Tipranks, the analysts from Maxim, Oppenheimer and Ladenburg Thalman have price targets that range from $14 to $15. This assumes 40%+ upside from current levels. The only Wall Street firm that is bearish on BNGO stock is Roth Capital, which as an awful price target of 75 cents!
Now the Bionano Genomics was smart to raise capital when the stock price was surging. As a result, the company’s balance sheet is now in much better shape.
But despite this, it does seem like a good bet that there will be continued volatility. Thus, for investors looking at BNGO stock, it’s probably a good idea to be cautious – as it already appears that lofty expectations have been factored into the valuation.
On the date of publication, Tom Taulli did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Tom Taulli (@ttaulli) is the author of various books on investing and technology, including Artificial Intelligence Basics, High-Profit IPO Strategies and All About Short Selling. He is also the author of courses on topics like the Python language and COBOL.
The post Lofty Expectations Are Already Priced Into Bionano Genomics appeared first on InvestorPlace.
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