Companies like Bionano Genomics (NASDAQ:BNGO) that once traded sub-$1 per share have become the favorite target of retail investors of late. Today, shares of BNGO stock trade at nearly $10 per share, providing investors with a one-year return of more than 2,200%!
It appears as if the penny stock rally we’re seeing today has a tremendous amount of momentum.
Indeed, a great deal of this gain appears to be driven by retail investors. BNGO stock continues to be a widely-discussed stock among social media-savvy retail traders today.
And, as we’ve seen with a number of popular Robinhood stocks, a little love from the average Joe goes a long way these days.
However, retail investor interest doesn’t tell the whole story here. Let’s dive into what’s going on with Bionano for interested investors.
A Business Model Investors Can Buy Into
A recent piece by fellow Investorplace contributor Chris Markoch really sums up the Bionano story well. Indeed, this is a company that “gives everyone a great deal to root for.”
Bionano’s core business is in providing a range of genomics solutions. The company’s focus is on using cytogenetics to target changes in chromosomes. The applications for Bionano’s products are wide-ranging. Among the most pertinent are various cancer applications, as well as applications in the research of Covid-19.
The company’s Saphyr system is the core product investors are interested in. This genome-imaging system has been successful in helping map genome structures that accelerate the growth of specific tumors. Additionally, another study in January highlighted Saphyr’s success in key structural variants within the coronavirus.
In February, the company announced it would be piloted by Canada’s largest hospital diagnostic lab. This provided further credence to this platform, and has helped accelerate BNGO stock’s impressive rise.
Bionano’s Lineagen acquisition is another feel-good story. Through Lineagen, Bionano is able to provide testing for patients across the Autism spectrum, and those with other neurodevelopment disabilities. The hope is that the company can speed up the search for solutions for those inflicted by these disabilities.
The Financial Picture for BNGO Stock
Now that investors have had their heart-strings tugged, let’s look at the numbers.
To begin, Bionano is still an early-stage company, so its revenues are tiny. That said, it does have revenues. The company pulled in a bit more than $7 million over the past 12 months.
Well, something’s better than nothing, but with a market capitalization of more than $2.5 billion at the time of writing, it means this stock is ultra-expensive right now.
The company’s been losing around $10 million per quarter as it ramps up sales initiatives. These sorts of financials for any company outside of early-stage biotechs would be concerning. However, this is the space we’re in, so investors need to bear that in mind.
Bionano did assuage these concerns via a series of equity financings. The company raised $89 million in its first round early this year. A second equity financing provided another (roughly) $200 million to Bionano’s coffers.
Given the company’s current cash burn rate and its newfound war chest, it appears BNGO stock is one that investors can sleep better at night holding. Of course, investors will be paying close attention to how Bionano’s sales efforts materialize in the coming quarters.
There’s hope that the 83% sequential Q/Q growth rate Bionano booked for its Saphyr system can continue. The company expects it can keep this momentum up. However, it should be noted sales of Saphyr only amounted to roughly $2.2 million this past quarter.
I think Bionano is an interesting stock right now. On the one hand, I like the story. I can see why average Joes are coming out of the woodwork to buy BNGO stock. It’s legitimately a company trying to make the world a better place.
However, on the other hand, it’s really, really hard to justify this valuation right now. Even with the most eye-popping, bullish revenue growth predictions, I don’t see a pathway to capital appreciation with this stock right now outside of continued market irrationality.
Momentum is everything these days, so maybe throwing the financials out the window is a winning strategy near-term. However, over the long-term, investors would be well-suited to do some analysis and come up with their own modeling and projections.
Right now, I can’t model out a scenario where this stock is worth what the market says it is. Even if I want it to be.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article.