Trying to choose a winner in the race to develop a vaccine for the novel coronavirus is akin to choosing a needle in a haystack if the haystack was blurry and there was a chance no needle is in there at all. So normally, when I see small-time biotech stocks like iBio (NYSE:IBIO) come up in the press, I’m inclined to pass. IBIO stock, for all its popularity, is massively risky. With that said, there is a case to be made for trading it.
If you buy iBio and forget it, you might as well head to the blackjack table. The firm has very little going for itself outside of its coronavirus play.
But if you’ve got the time, money, and discipline to trade it short-term, IBIO stock could make you some money.
IBIO Stock Is a Coronavirus Play, Kind of
iBio is a biotech firm working on a coronavirus vaccine. Shares of the tiny vaccine maker are up more than 1000% so far this year as investors look to the firm to end the pandemic. That kind of growth might sound incredible, but penny stocks are capable of wild swings because of their ultra-low share price – IBIO stock was trading at just 30 cents apiece in January.
iBio is working on two potential Covid-19 vaccines, one of which recently showed encouraging results in pre-clinical trials. But what sets iBio apart from its competitors is its FastPharming process. The company uses a unique plant-based manufacturing system that is more efficient. Because scaling up production simply requires more plants, the whole process is relatively fast and inexpensive.
That means iBio could make money as a vaccine maker or a production partner. But that doesn’t necessarily mean IBIO stock will go anywhere – the company could also go nowhere at all.
Why Buy iBio?
While all of that might sound like a bull case for iBio stock, it’s not. The fact remains that iBio is not profitable. The firm’s margins have been sinking by roughly 10% on average over the past five years. Revenue-per-share has also been sliding.
For IBIO stock it’s Covid-19 vaccine or bust – and bust is a likely possibility.
With that out of the way, here’s why you might buy iBio stock: short-term, relatively predictable, gains. I can’t stress enough that this kind of investment is inherently risky and it isn’t for everyone. But the bottom line for these Covid-19 vaccine plays is that their stocks react to vaccine news big-time.
iBio spiked tremendously in July and investors have started taking profits on those gains. On top of that, news that Russia has developed the world’s first Covid-19 vaccine and encouraging rhetoric from Moderna suggests iBio is out of the race.
But that doesn’t mean iBio belongs in the garbage can. In fact, quite the opposite. I think iBio just became a stock to keep on your shortlist. Any evidence that Russia’s rushed rollout is failing or Moderna isn’t going to come out on top could send iBio on another flight upward. Not only that, but iBio is heavily shorted right now, so if the stock is able to pull of even a fraction of its previous spike, it could turn into a short squeeze as investors cover their positions.
The Bottom Line on iBio
I don’t think iBio is out for the count just yet. The firm has earnings coming up at the end of this month and a usable vaccine is still worlds away for the majority of the world. I wouldn’t buy iBio without a catalyst, but I’ll certainly be keeping my eye out for good news and a quick, short-term profit.
If IBIO stock can cross $2.73 per share and remain above that level, the firm has a shot at making another run. Until then, I’d stay on the sidelines.
Laura Hoy has a finance degree from Duquesne University and has been writing about financial markets for the past eight years. Her work can be seen in a variety of publications including InvestorPlace, Benzinga, Yahoo Finance and CCN. As of this writing, she did not hold a position in any of the aforementioned securities.
