It’s Tough to Admit, but Our New Normal Might Justify Buying IBIO Stock

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Generally, I’ve been somewhat positive on so-called “coronavirus stocks” like iBio (NYSEAMERICAN:IBIO). In the race to find a viable treatment, several speculative pharmaceutical names have skyrocketed during the initial onset of the outbreak turned pandemic. However, many skeptics countered that IBIO stock is largely dependent on a single virus. Once demand for the treatment fades – as all outbreaks eventually do – so will iBio.

It's Tough to Admit, but Our New Normal Might Justify Buying IBIO Stock
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So far, the skeptics have been right on the money, at least when it comes to IBIO stock. On Feb. 28, shares closed at a peak price of $2.45. Since then, it’s been a choppy ride downward. At time of writing, shares finished the April 2 session at $1.03, or a 58% loss since the peak close.

The obvious distractions haven’t helped IBIO stock. First, the underlying company isn’t exactly what you would call confidence-inspiring. Recently, revenue has been declining while net income consistently falls into negative territory. As you might expect, the pharmaceutical firm has very little cash on hand against a huge debt pile.

If it weren’t for the coronavirus, I don’t think anybody would want to touch it. Surely, investors wouldn’t drive iBio up to ridiculous levels.

And that brings me to my second point: IBIO stock has a very spotty history. As InvestorPlace contributor Vince Martin explained, iBio suffered a severe boom-bust cycle during the Ebola scare. Over a two-month period, shares skyrocketed over 600% but quickly came back down to earth.

To be fair, Martin offers a possible bullish argument for IBIO. Thanks to its partnership with Beijing CC-Pharming, iBio could leverage its technology to mass-produce a possible coronavirus vaccine. Still, this is a very risky bet.

New Paradigm Supports IBIO Stock

Before I get into my counterargument, I will remind readers that this is not for the faint of heart. If you can’t handle wild swings, iBio isn’t for you. Because of its fiscal vulnerabilities, it might not keep up with the competition.

Still, I find IBIO stock relevant because we’re suddenly in a new paradigm. With the severe and unprecedented economic turmoil that we have witnessed in these frightening past several days, one thing became abundantly clear: we’ve got to devote resources to fully kill this virus.

This sounds obvious, but hear me out. Some politicians may want to restart the economy quickly given the awful pain we’ve suffered. However, restarting prematurely can have lasting consequences. According to a report posted on the Federal Reserve Bank of New York’s website, areas in the U.S. most affected by the 1918 Spanish flu pandemic witnessed prolonged declines in real economic activity. Interestingly, aggressive public health interventions did not depress the economy.

For me, the lessons in the past are clear: if you’re going to shut down the economy, you might as well kill the coronavirus for good. Nothing is worse than hastily declaring “mission accomplished.”

U.S. coronavirus cases trend and forecast
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Source: Chart by Josh Enomoto

On that note, the timeline for the coronavirus will probably extend into late summer at least. Several weeks ago, I was one of the first people to submit a trend analysis on international coronavirus cases using the onset of community spread as a starting point. At the time, I suggested IBIO stock has a longer time frame than many would believe.

Unfortunately, I was right. With the latest data, I forecast U.S. coronavirus cases to hit around half-a-million by Easter. That implies a comparatively lengthy infection curve, which cynically supports iBio.

Don’t Get Hung Up on COVID-19

Of course, many competitors exist in the COVID-19 treatment race, including pharma giants like Gilead Sciences (NASDAQ:GILD). Again, you don’t want to jump into IBIO stock with money you can’t afford to lose.

However, I believe many critics are hung up on iBio’s credibility toward COVID-19. Honestly, I’m not sure if the company will participate in any meaningful way during this terrible pandemic. But that doesn’t represent the only argument for IBIO.

Instead, contrarians should consider the possibility of the next infectious disease. Or, what if COVID-19 comes back again this winter and strikes with a greater fury? By now, you know that not only are these things possible, but they may be probable.

If so, I would have deep concerns about both our domestic and global economies. We can’t handle another one of these mass-scale quarantines. But because we set a precedent, mandatory shelter-in-place orders could become part of our post-coronavirus normal.

In this situation, we need all hands on deck in the pharmaceutical industry. That could benefit IBIO stock in the long run despite its weaknesses.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.


Article printed from InvestorPlace Media, https://investorplace.com/2020/04/new-normal-justify-ibio-stock/.

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