The last time I wrote about BioNano Genomics (NASDAQ:BNGO), I recommended investors put aside some cash for when the BNGO stock price corrected.
That was Feb. 16. It was trading at almost $16. One month later, it’s down 40%, and you can buy its stock for single digits.
Before you run out and buy, thinking this is the correction I was referring to, consider the alternatives before jumping on the bandwagon. You always have options.
The First Alternative to BNGO Stock
InvestorPlace’s Mark Hake recently tried to figure out how many shares BioNano had outstanding. He concluded the number was 276.83 million. According to Google Finance, it has a market capitalization of $2.54 billion. Based on a $9.40 share price, that’s 270.2 million. According to Morningstar.com, it’s more like 269.5 million.
I’m just going to go with my colleague’s number. That means it has a market cap of $2.6 billion.
Is the maker of the Saphyr genome analysis system the best bet at $2.6 billion?
A quick look at the potential options around the same market cap in the diagnostics and research industry within $500 million on either side ($2.1 billion to $3.1 billion) gives you four alternatives. If you widen the search to the entire healthcare sector, we’re talking about 53 options. That’s no small number.
Now, there are two ways you can go with this cohort. You can restrict your choices to medical devices, medical instruments, and diagnostics and research. That reduces the choices to a more palatable group of 11 stocks.
On the medical device front, I like the Butterfly Network (NYSE:BFLY), a company that has created a portable handheld single-probe whole-body ultrasound system. It recently combined with the Longview Acquisition Corp. in a merger that valued the combined entity at $1.5 billion with $584 million in cash on its balance sheet.
Longview is the creation of Larry Robbins, the founder of Glenview Capital, an investment firm specializing in healthcare investments. According to its merger presentation, Butterfly has 203.7 million shares outstanding. Based on a current share price of $19.87, it has a market cap of $4.05 billion.
Technically, according to what I said earlier, BFLY should be excluded from consideration as a BNGO stock alternative. However, my argument for consideration is that it only had $44 million in estimated 2020 revenue, with it expected to grow to $138 million in 2022.
I don’t know about you, but Butterfly seems a lot more ready to fly at 90 times 2020 sales [$4.1 billion divided by $44 million] than BNGO stock is at 108 times forward 2021 sales.
The Second Option
Rather than focusing on market cap instead, I’ll look at stocks trading around $10. According to Finviz.com, there are 13 healthcare stocks with a market cap of $2 billion or higher.
The closest stock in terms of stock price and market cap is Sorrento Therapeutics (NASDAQ:SRNE). It specializes in novel immunotherapies for oncology and autoimmune/inflammation diseases. However, it is the work it’s doing on its Covid-19 vaccine candidate, T-VIVA-19, that has investors betting on a tremendous payday.
As InvestorPlace’s Louis Navellier said recently, investors should stop fixating on a vaccine and instead focus on the other things it’s got going on. Its diversification, Navellier argued, is a big reason B. Riley Financial analyst Mayank Mamtani “initiated coverage of MRNE stock in February with a “buy” rating and a $26 price target.”
Navellier is so convinced Sorrento is going to take off, he holds a position in the biotech stock. That’s true commitment.
In early December, I suggested that the margin of safety was much better at a stock price of $6 to $6.50. To buy over $8 wasn’t a good idea. The closest BNGO stock got to $6.50 was at the end of December. Since then, it’s moved as high as $16.51 before falling back into the low double digits.
For speculative investors, under $10, it’s a very interesting buy.
The Bottom Line
Of all three stocks discussed, I don’t think there’s any question Butterfly Network has the best chance of long-term profitability.
With gross margins expected to grow from 43% in 2021 to 68% in 2024, at which time revenues will be over $330 million, it’s got an opportunity to become a nice-sized company while doing some good.
Investing involves risk at the best of times. Don’t make it harder on yourself. If you must buy BNGO stock, don’t pay more than $10 a share.
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.