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BioNano Genomics Will Likely Be Volatile Prior to Q4 Earnings

San Diego-based BioNano Genomics (NASDAQ:BNGO) stock has had a roller-coaster ride in recent weeks. BNGO stock finished 2020 at $3.08. Then, on Feb. 16, 2021, it hit a record high of $15.69. By March 5, the share price was down to $5.58 and now it’s up to $9.

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Covid-19 put different health and biotechnology businesses on investors’ radar. Early 2021 saw new strains of the coronavirus spread globally. Scientists working in genomics were successful in identifying those different strains. As a result, investors have decided to put capital into shares like BNGO stock.

Other names that have also received interest include Illumina (NASDAQ:ILMN) and Pacific Biosciences of California (NASDAQ:PACB).

The World Health Organization defines genomics “as the study of genes and their functions, and related techniques.” Thanks to advances in science, “Genomic technologies are paving the way for new diagnoses, treatments and therapy for patients with rare and ultra-rare disease.”

BioNano Genomics will release Q4 and full-year results on March 23. If you are not yet a shareholder, you might want to wait until you can analyze the metrics to be released in the coming days. But if you have paper profits, you might want to take some money off the table. I expect the choppiness to continue for BNGO stock around the earnings date.

What To Expect From Q4 Earnings

Amy L. McGuire, a professor at Baylor College of Medicine in Houston believes genomics will help scientists “to more accurately predict disease risk and tailor existing treatments on the basis of genetic and non-genetic factors but also to potentially cure or even eliminate some diseases entirely with gene-editing technologies.”

BioNano’s main product is the Saphyr system, a platform to analyze the long segments of genomic DNA. Its other products include proprietary nanochannel chips, imaging instruments, laboratory equipment, as well as software. It is a small company with a market capitalization of about $1.7 billion. 

In January, the company showcased technologies related to several cancer types, autism spectrum, as well as Covid-19. Its scientists have been looking at why certain patients might suffer coronavirus symptoms more or longer than others. As a result, the market took an interest in BNGO stock.

Yet, in the third quarter BioNano reported losses of $10.8 million. In the first three quarters of 2020, sales declined on a year-over-year basis. That does not bode well for an emerging company. Its price-sales ratio stands at an eye-popping 93.9x. Most established biopharma names have P/S ratios in low single digits.

In fact, in recent months BioNano had two offerings to raise $330 million. Management estimates that the potential market reach of the Saphyr platform could eventually be $2.6 billion to $3.8 billion. However, this is a forward-looking statement without enough data to back it up.

When we compare that estimate with the current market cap, we might note that the recent gains in BNGO stock might already reflect the potential of the platform and the valuation of the business.

The Bottom Line on BNGO Stock

As genomics research advances so will investors’ interest in companies that are working in the field. Therefore, the Street will likely focus more on stocks like BNGO. However, becoming a dominant player in this niche field takes considerable resources.

In other words, for BNGO stock to be able to sustain the buzz and recent run-up in price, it would need sustained revenue growth. Unless management charts a course for the company’s development, the recent hype might simply die down.

Unless BioNano becomes profitable soon, it would possibly need to raise more cash. Management could borrow money. However, that would mean interest servicing. The other option is to have more offerings to raise capital. But such a move would dilute the share price. Therefore, potential shareholders need to look at revenue and other fundamental metrics of the company carefully.

Investors with paper profits may want to decrease their positions in BNGO stock prior to March 23 earnings release. If your portfolio allows you to invest in risky but potentially explosive biotech names, you might consider building a position around $7 or below.

Alternatively, you could also consider buying an exchange-traded fund (ETF) with a thematic focus. They include the ARK Genomic Revolution ETF (NYSEARCA:ARKG), the Global X Genomics & Biotechnology ETF (NASDAQ:GNOM), and the iShares Genomics Immunology and Healthcare ETF (NYSEARCA:IDNA).

On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination.

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