Ocugen (NASDAQ:OCGN) stock looks to be more hype than substance. But, for the time being, don’t expect that to make a dime of difference. With its Covid-19 vaccine partnership now a signed deal, this former penny stock is now firmly in the double digits, at $10.25 per share.
Those who got in early has seen a massive windfall. But, how about those a little late to the party? Is there still the opportunity for fast gains?
Not so fast. You may think that, with stocks trading divorced of fundamentals, Ocugen can continue to climb on online hype alone. But there may be a bit of recency bias going on. With the unprecedented price moves in GameStop (NYSE:GME) late last month, it seems reasonable now to assume other stocks will make similar mind-boggling moves.
This makes buying Ocugen at today’s prices more a bet on continued investor mania. Sure, it could pay off. But this kind of trade is firmly in the “picking up pennies in front a steamroller” camp. You could make some small profits riding this wave.
But if the music stops? Game over!
Pardon me if that sounds a bit dramatic. But, if the company’s Covid-19 deal fizzles out, there’s little to sustain this stock at $2 per share, much less today’s prices.
Can OCGN Stock Continue to Climb on Its Covaxin Catalyst?
It’s surprising how Ocugen’s Covid-19 catalyst continues to give the stock substantial runway. The company announced its deal to bring India-based Bharat Biotech’s novel coronavirus vaccine to America back months ago.
Back in January, I argued that the rally in OCGN stock was overextended, given that there was a lot of uncertainty with this vaccine candidate. I may have called a top way too early. Yet, at today’s stock price, buying in today for the (possible) windfall from Covaxin doesn’t look to be worth it.
Why? The likelihood this vaccine deal changes the game for Ocugen hasn’t really increased or decreased in the past month. InvestorPlace’s Will Ashworth broke down the myriad of concerns still on the table in his Feb. 8 article on the stock. Between a lack of data on its Phase 3 trials in India, and its questionable prospects of receiving FDA approval in the United States, it makes little sense that investors have bid this up many-fold on just the phrase “Covid-19 vaccine” alone.
Nevertheless, despite its irrational hyper-rally, the madness could carry on. That may make it too risky to go short even as it’s obviously overvalued stock. Yet, while the short side looks unappealing, this doesn’t little to make taking the long a worthwhile decision.
Why Ocugen’s Wacky Price Moves Could Get Even Wackier
After the whole GameStop affair, short sellers may be a bit wary about betting against clearly overvalued stocks. In a normal market environment, you can fade the madness, since market participants (historically) give credence to fundamentals at the end of the day.
But in today’s market, where retail investors crowd into certain stocks en masse with nary a care about “underlying value?” All bets are off. Even small potatoes positive news out of Ocugen may be enough to send it soaring further from today’s prices.
Yet, this alone isn’t good reason to hop aboard. Forget about thinking of OCGN stock in terms of it being an investment. Not only is it more of a gamble, it’s not even a gamble on the possible success of Covaxin.
Instead, it’s a shot-in-the-dark wager on continued investor madness. If you call it right, you may see some gains. Just not at the level we’ve seen in its prior parabolic price moves.
And, if you’re wrong? Downside risk could be massive. And not limited to just a 50% pullback.
It’s Too Late, So Don’t Worry About It
Forget that the company was able to execute a direct offering of new stock at $7.65 per share. That price of that $23 million equity infusion is by no means the “floor” for this stock. If things don’t work out with Covaxin, OCGN stock will give up almost all of its recent gains. Without the Covid-19 catalyst, this biotech company goes back to being valued on its existing pipeline.
OCU400, Ocugen’s gene therapy candidate for inherited retinal diseases, may have some potential. But, like I said above, outside of its pandemic-related catalyst, this may not even be enough to support a $2 per share valuation for this stock.
If you didn’t get in before the recent madness took hold, don’t worry about it. With the opportunity for fast, epic trading profits come and gone, there’s little reason to waste time chasing OCGN stock.
On the date of publication, Thomas Niel did not (either directly or indirectly) hold any positions in the securities mentioned in this article.
Thomas Niel, a contributor to InvestorPlace, has written single stock analysis since 2016.