One of Wall Street’s darlings amid the novel coronavirus pandemic has been clinical-stage, DNA medicine company Inovio (NASDAQ:INO). In fact, since the pandemic emerged globally in February 2020, the INO stock price has climbed from $3 to as high as $33.
It’s easy to see why Wall Street fell in love with INO stock.
After all, Inovio is one the leaders when it comes to developing a Covid-19 vaccine. The financial implications of such a vaccine are enormous, considering this is a pandemic which has infected nearly 10 million people globally and shut down the global economy for months. Furthermore, the company should be able to leverage its Covid-19 spotlight to accelerate the development and eventual distribution of other vaccine candidates in its pipeline.
In other words, Covid-19 was truly a game-changer for this small biotech company. Having said all that, though, I’d still tread very carefully with INO stock at current levels.
And here’s why.
Speculative Upside for INO Stock
While I understand that Inovio is a robust DNA medicine company with a lot going on besides its Covid-19 vaccine candidate, I also understand that INO stock didn’t rise 800%-plus until Wall Street took notice of the company’s Covid-19 vaccine.
As such, even though Inovio does have a bright future as a DNA medicine company, the 2020 mega-rally in INO stock is built on the back of Covid-19 vaccine hopes.
However, those hopes are highly speculative.
There are nearly 150 Covid-19 vaccine candidates in the world. Exactly 25 of them — including Inovio’s Covid-19 vaccine, INO-4800 — are in human trials. In this sense, Inovio isn’t terribly special on the Covid-19 front; It’s one of 25 companies testing its vaccine on humans.
Furthermore, INO-4800 was critically left off of U.S. President Donald Trump’s list of five Covid-19 vaccines on the final list of Operation Warp Speed. Those five vaccines are widely considered to be the leaders in the race to develop a coronavirus vaccine.
In other words, Inovio is a leader in developing a Covid-19 vaccine — but not the leader. Or even in the first-tier leader group. Rather, Inovio is one of 18 second-tier leaders.
And that seems like a dangerous place to be with the INO stock price up 800%-plus since February.
Therefore, any bad news on the INO-4800 front could cause the stock to collapse.
Technically Overbought
From a technical perspective, it looks like INO stock is due for a pullback.
Thanks to a second wave of Covid-19 cases across America, coronavirus vaccine stocks have been in rally mode. INO stock, for example, is up 100% over the past five trading days alone.
With this huge rally, the Relative Strength Index (RSI) on INO stock has jumped to around 80 — which, by standard definitions, places the stock in technically overbought territory.
In 2020, Inovio stock’s RSI has jumped above 80 three times before. Late January 2020, early March 2020 and late April 2020.
Each time, INO stock was at a local peak, and shares proceeded to collapse over the subsequent few weeks. By 40%-plus in January, 50%-plus in March and around 30% in April.
So, even if you’re bullish on the Inovio growth narrative and the company’s ability to both deliver on a Covid-19 vaccine and leverage its coronavirus spotlight to accelerate the rest of its DNA medicine portfolio, I still wouldn’t buy INO stock here.
That said, let it cool off. Wait for the next dip (which is probably coming soon), and buy it.
Bottom Line on INO Stock
Inovio is a strong DNA medicine company with a bright future. However, at the current moment, INO stock is little more than a highly speculative play on the company’s Covid-19 vaccine — INO-4800.
An investment in INO stock at current levels will pay off handsomely if INO-4800 continues to pass human trials, wins approval and gains mainstream distribution either in the U.S. or globally within the next 12 months.
However, an investment in INO stock at current levels will lose you a lot of money if INO-4800 either fails to pass human trials, fails to win regulatory approve and/or fails to achieve broad distribution.
In other words, there is a lot speculation surrounding Inovio stock. Too much speculation — and too little visibility — to warrant chasing INO stock here.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been recognized as one of the best stock pickers in the world by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, he did not hold a position in any of the aforementioned securities.
