As soon as the calendar turned, it was a whole different kettle of fish. As I write this, it’s up nearly 400% year-to-date. Go back three months and we’re talking about return of more than 2,800% return.
That’s some rocket fuel-induced lift-off.
BioNano Genomics is one of the many companies I had never heard of until Robinhood and Reddit investors took to buying up these relatively unknown stocks.
I like to say that if you can’t tell someone why you own a stock in a single sentence, you have no business owning it. When it comes to anything biotech, I’m hopeless.
The easiest way for me to describe its business is to say that it makes Saphyr, which is a genome mapping tool for researchers.
The truth is: I would never buy this stock because I’m old school, like Warren Buffett. If I don’t understand something, I tend not to look any closer. That doesn’t mean you shouldn’t.
That said, the latest run it’s been on could be a one-and-done situation and not the beginning of a leg up to $100.
The Pros of Owning BNGO Stock
BioNano’s become more relevant as a result of Covid-19. InvestorPlace contributor Chris Markoch recently discussed this subject.
[I]n January, the company released information from a study that identified key structural variants (SVs) which may provide researchers with a better understanding of why Covid-19 affects patients so differently,” Markoch wrote on Feb. 12. “The senior author of the study, Ravindra Kolhe, MD, PhD, remarked that the Saphyr system had effectively mapped out large genomic variants that other methods had missed.
The company’s marketing becomes a lot more effective because of these kinds of examples. Quite simply, the Saphyr system works as intended.
As another of my InvestorPlace colleagues, Josh Enomoto, recently said, BioNano “is a relevant play on the burgeoning field of cytogenetics.”
So, it brings more to the dance than a play on Covid-19. Thus, Enomoto suggested if you want to make a speculative bet, leave a little cash behind for a potential decline in its share price as the technicals fall apart.
The Cons of Owning BioNano
When in doubt, I look to the financials for confirmation. The numbers don’t lie.
When BioNano went public in 2018, it had fiscal 2017 sales of $9.5 million and, not surprisingly, a $23.4 million loss. Revenues were heading in the direction, up 40% over 2016. The six-month numbers through June 2018 were also up 32% year-over-year.
BioNano reported Q3 results in mid-November. On the top line, revenues actually fell 34% to $2.20 million from $3.31 million a year earlier. Through the first nine months of the fiscal year, revenues fell 39% over the same period a year earlier.
It had an operating loss of $10.23 million, up from $5.69 million in Q3 2019. For the nine months ended Sept. 30, it lost $27.43 million from operations, 47% higher than a year earlier.
Revenues were down due to the mix of revenue between its instrument sales and its reagent rental program. The change in mix affected its cost of revenues, which gained 39% in the third quarter. Operating expenses increased 67% due to its increase in headcount from acquisition and an expanded global sales team.
I would say that’s to be expected when a company’s trying to grow its business.
However, based on 12-month (TTM) sales of $7.3 million, its current market capitalization of $3.2 billion is 438x sales. You can buy Alexion Pharmaceuticals (NASDAQ:ALXN) for less than 6x its $6.1 billion in TTM sales. And it has $2.86 billion in operating profits, not losses.
The Bottom Line
As fun money bets go, I can think of many other possibilities that don’t require nearly as much brainpower to understand. But then again, I’m not the one making the buy.
As I write this, BNGO stock is up another 12% on the day. There is no question it’s on a roll. If you’re going to buy, take my colleagues’ advice and keep some cash for a rainy day when prices correct.
And they always do.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.