From a fundamental perspective, I have not been a big fan of Inovio Pharmaceuticals (NASDAQ:INO). However, INO stock has continued to sport very solid technicals.
I have long believed that combining the two studies can yield superior results. When a stock has excellent fundamentals and excellent technicals, it can be a potent recipe for a higher stock price.
Inovio may not have the fundamentals that we want, but it’s chart sure looks good. Let’s look at this one from a trading perspective first.
Trading INO Stock
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This stock erupted in March, bursting from $4 to almost $20 in just a few days. After pulling back and settling in, it was clear that $9.50 was resistance for INO stock.
While the stock struggled to break out over this mark, it continued to put in a series of higher lows, riding uptrend support higher (blue line). In mid-April, shares finally broke through, rallying to $16 — what is now current resistance — before pulling back.
This part is important, because on that pullback, shares found support at prior resistance near $9.50. That’s a key bullish development that has continued to play out.
With the 50-day moving average and uptrend support still buoying INO stock, investors can stay long this name so long as that observation remains true. If Inovio can reclaim its 20-day moving average, it puts $16 resistance back in play. On a move over $16, the 52-week high up at $19.36 is possible.
This will be key for bulls, too. Should INO stock break below the 50-day moving average and close below the month’s current low at $11.13, it puts the $9.50 level back in play. Below $9.50 and a larger decline could be in store for the stock.
Like I said, if we back out the fundamentals for a minute and focus solely on the technicals, this one looks pretty good. For now, the dips are being bought and bulls remain in control.
Valuing Inovio Stock
My biggest problem with Inovio is the fundamentals. For a trade, I don’t mind discarding the fundamentals and only focusing on the technicals. However, for an investment, I need the fundamentals to work. In that sense, it depends on how you’re looking to utilize INO stock.
If it’s an investment you’re after, Inovio may not be your top candidate.
The company has essentially no revenue at the moment. While it did have $30.4 million and $42.2 million in sales in 2018 and 2017, respectively, it has virtually none now, with just $4.1 million generated in 2019.
The lack of revenue hardly matters though, with Inovio doling out a net loss in each of those years. In 2019, it lost almost $120 million. In this situation, it should go without saying that INO stock also does not generate positive free cash flow.
So forget a minute about actual growth, and realize that this company barely has any revenue at all, and thus, does not generate positive cash flow or profit.
After boosting its cash position, INO stock does have about $270 million in cash and short-term investments, which will certainly buy it some time. Particularly as it only has current liabilities of $32.3 million and as total assets outweigh total liabilities $338.9 million to $151 million.
That said, if we are investing in a company for its balance sheet strength, we’ll take Facebook (NASDAQ:FB) or Alphabet (NASDAQ:GOOGL, NASDAQ:GOOG) over INO stock.
At the end of the day, Inovio is a play on the novel coronavirus. If it cracks the code on finding the cure, the stock will explode. If it doesn’t, the stock could very well go right back to where it started from. That’s too binary of a situation for me and therefore, Inovio only remains a trade candidate.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long GOOGL.
