Zomedica Corp (NYSE:ZOM) has been an interesting case study in the power of hype – Reddit, Robinhood and celebrity endorsements (even accidental ones) – to propel a stock to stratospheric levels. The Michigan-based company has no revenue. It’s on the verge of launching its first product, a veterinary diagnostic kit for dogs and cats. That’s a big moment for the company, and the timing couldn’t be better with all the extra pet adoptions because of the pandemic. But does the prospect of finally generating revenue justify a 2,500% surge in ZOM stock price in four months?
I would argue that it does not. This is another case of hype causing a dramatic spike in value. The fallouts from that hype have included extreme volatility in ZOM stock. Gains of 41% one day, followed immediately by a drop of 14% the next session.
That has been the ZOM stock story in 2021. It’s not a pretty picture if you’re trying to get a handle on where this company’s shares are going to go next.
The big news for Zomedica and any investors who have interest in this company as a long-term holding is Truforma.
The company’s very first commercial product, Truforma is a shoebox-sized point-of-care diagnostic tool for veterinary offices. It allows veterinarians to conduct tests onsite for cats and dogs. Being able to conduct the test themselves gives faster results, allowing for a quicker start of treatment. At this stage, tests are available for thyroid and adrenal issues, but more are coming, including tests for gastrointestinal conditions – currently the most common insurance claim for dog owners. Truforma goes on sale starting March 30.
This is all good, and on its own, Truforma makes Zomedica worth watching. Americans were already spending a fortune on pet health care ($29.3 billion in the vet office in 2019). The pandemic-fueled pet boom is only going to raise that.
ZOM Stock Goes Off the Rails
So far, we have a compelling story about an interesting company about to tap into a lucrative market. However, things aren’t quite that simple when it comes to Zomedica.
Last November, ZOM was a penny stock facing the prospect of delisting. An attempted reverse stock split was rejected by shareholders.
In 2021, things really began to spin. In January, Carole Baskin of Tiger King fame was paid $299 by a fan to mention Zomedia on Cameo. That kicked off a 230% ZOM stock rally. With chatter ramping up on Reddit, ZOM put together another big surge in February, gaining 137% over three sessions. Zomedica took advantage of the run up in price to issue more shares, bringing $173.5 million in cash. Naturally the market didn’t like that move, and ZOM stock has slipped about 30% since the deal closed.
Bottom Line on ZOM Stock
The bottom line on Zomedica – like so many under-the-radar companies of late – is that it caught the attention of the Reddit/Robinhood investing crowd. Heck, the stock was even flogged on Cameo by a celebrity.
Yes, the company is about to launch Truforma, its first product. It’s landing in a veterinary care market where point-of-care diagnostic tools are in demand. And at a time when pet ownership in the U.S. has never been higher, thanks to the pandemic.
However, this is a company that has struggled mightily to get here. It spent last year as a penny stock, with the company facing delisting. It attempted a reverse stock split that failed, then released more shares when its stock shot up in value – a move that kicked off the current drop in ZOM stock prices. Six months ago, 15 million shares would trade hands on a good day. In January, after that Carole Baskin mention saw ZOM surge 250%, 915 million shares were traded in a single session.
Despite the drama over the past three weeks, ZOM shares are still up more than 2,500% compared to the value in late October. Sound like something you’d like to wade into? Me neither. It’s definitely worth checking back in to see how the company is doing once Truforma has hit the market, but for now its stock is just too volatile for my taste.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation.