Inovio Pharmaceuticals (NASDAQ:INO) has been among the few bullish standouts amid the coronavirus outbreak. While the Nasdaq is still 23.4% off its high and down 16.5% year-to-date, INO stock is up more than 120% in 2020.
However, that does little to tell the whole story. Despite sporting lofty year-to-date gains, Inovio shares are more than 50% off the highs from last month. Although it’s worth pointing out that it’s also significantly ahead of the iShares Nasdaq Biotech ETF (NASDAQ:IBB), which is down 10.4% this year.
So what do investors do with this low-priced stock and is it a good play on finding a cure or vaccine for the coronavirus?
Inovio vs. Coronavirus
While these stocks create opportunity for investors, they also set up for potential disappointment. Essentially, without other substantial business segments, these companies are a binary play on finding a cure or vaccine for COVID-19. Without one, these stocks are liable to go back to their prior pre-coronavirus levels.
For Inovio, the company has been pushing forward with its solution, which is a potential DNA-based vaccine. Last month, Inovio announced that it would partner with Ology Bioservices to produce that vaccine, which the company plans to have ready for Phase 1 testing later this month.
That said, there are a lot of other companies in the hunt for solving the COVID-19 puzzle. Will a deep-pocketed competitor — like Gilead Sciences (NASDAQ:GILD) — beat Inovio to the punch?
It’s possible; anyone winning is technically possible — but so is everyone losing.
Sizing Up INO Stock
INO stock exploded from sub-$4 to almost $20 in just a few trading sessions. Since then, it has cooled off immensely, settling in around the high-single-digit range. Inovio shares are now coiling in a tightening range, as the stock wedges closer together.
The stock is putting in a series of higher lows and lower highs. It’s setting the stock up for some kind of break — either higher or lower out of the range. Following such a large move higher, the charts actually favor the bulls. The problem is, Inovio is not a typical stock, in that technicals aren’t driving the share price, the news is.
A break below wedge support likely puts the 50-day moving average in play. Below that and the $5 level is on the table. Should INO stock break out over resistance, look to see if it can climb to the $10 mark. Over $11 and $14-plus is possible.
Is a rally possible? It is, but the reaction is likely tied to the outcome and news flow of Inovio’s COVID-19 treatment.
That said, the company does have other possibilities, although they too are somewhat binary. Inovio reported positive results from its Phase 2 trial of VGX-3100, a DNA immunotherapy for patients with anal dysplasia. While promising, there’s not a lot to fall back on in terms of solid financials.
Recent quarterly results showed a loss of 38 cents per share on revenue of just $280,000. The latter declined almost 90% year-over-year, while the former missed expectations by 14 cents. A day later, Inovio filed a mixed-shelf offering of up to $400 million.
An influx of cash would be nice and would buy the company time. But INO stock is clearly not a name you buy for rock-solid fundamentals. Instead, it’s a name you buy for big-time upside potential with major risk as the downside. In that sense, Inovio is more like an option than a stock. I personally do not feel comfortable with binary plays and would rather opt for other options with more stability, like Gilead. It may not have the same upside if things work out, but its downside is more limited.