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Analyze Senseonics Thoroughly Before You Feed the Meme

Although they generate tremendous attention, meme stocks do not exactly inspire confidence. Many find them to be euphemism for pump-and-dump schemes – and note that they’re not called pump-and-pump schemes. Therefore, when that label attached itself to Senseonics (NYSEAMERICAN:SENS), it wasn’t the greatest endorsement for SENS stock, as our own David Moadel explained.

image of the word diabetes surrounded by medical equipment.
Source: Minerva Studio /

But if you are able to get over this not-so-flattering characterization, Senseonics may give speculators something to think about.

First, we have the underlying business. Unlike other meme stocks that enjoy a low price tag because they’re complete and utter garbage, Senseonics offers a fundamentally viable business – a blood sugar sensor for diabetes patients that’s placed under the skin.

As you likely know, one of the unpleasant inconveniences of living with diabetes is having to endure frequent finger pricks to check blood sugar levels. Certainly, advanced technologies and platforms have taken much of the inconvenience out of the equation. Also, advocacy groups have presented lifehacks to substantially mitigate the pain.

Yet the pain and discomfort remain at some level. By theoretically eliminating or dramatically cutting the need to undergo finger pricks, this attribute is enough to warrant another look at SENS stock.

Second, beyond the convenience aspect, an under-the-skin sensor improves overall quality of life for diabetes patients. A sensor can alert the user if blood sugar levels reach a critical point. Also, the device can provide meaningful analytics, providing key feedback regarding the impact of certain dietary and exercise regimens.

Third and most impactful for SENS stock, Senseonics applied for approval from the Food and Drug Administration. It needs this before the company can launch the product.

Granted, that adds some uncertainty into the mix. However, approval may come sometime in the third quarter of this year. If so, SENS stock could really fly higher. Anticipation of said approval was one of the reasons why shares closed above $5 earlier this year.

Tread Carefully with SENS Stock

In terms of popular meme trades, SENS stock is head and shoulders above the rest. But that doesn’t necessarily mean that you should go out and buy shares without thinking about its risk factors.

For one, FDA approval is a tricky subject. Obviously, the novel coronavirus delayed many companies seeking the regulatory green light because the agency focused on assessing solutions to address the immediate global threat.

Yes, coronavirus cases are fading, which theoretically helps SENS stock. But let’s be brutally honest here – the FDA is a government agency. I don’t need to remind you that government as a general entity isn’t a bastion of transparency and efficiency. Therefore, it may take longer than expected for the FDA to work through its backlog.

Plus, keep in mind that while Covid-19 cases are down, it doesn’t mean that the crisis is over. If we have a resurgence, that’s not going to favor the narrative for SENS stock.

Relating to the business, Senseonics’ platform, which falls under the category of continuous glucose monitoring (CGM) systems, has its fair share of pros and cons. According to Dr. Caroline Messer, finger pricks may still be necessary to calibrate CGMs for accuracy. Further, such systems may not be as accurate or beneficial for certain types of patients.

But the whopper could come down to cost. According to Messer:

CGM machines are expensive, with initial costs that can range from between $1,000 and $2,000, and require a prescription. In addition, supplies can cost between $300 and $450 per month, including sensors that should be replaced every three to seven days. Insurance may cover the cost of the device and supplies, but plans and qualifications vary.

I’m not entirely privy to Senseonics’ exact cost structure. But if it fails to live up to a certain performance-to-cost ratio, this could negatively impact SENS stock.

A Different Kind of Shampoo

Now, speaking of head and shoulders, I can’t help but notice that SENS stock is currently charting a pattern of the same name. It’s not quite the classic head-and-shoulders formation. However, you can make out shoulder-like price action in late January and around mid-March of this year, with the pronounced head represented by the sessions of Feb. 16 and Feb. 17.

To me, it seems the investment community has given up on the idea that Senseonics will receive FDA approval anytime soon. Or, they may have looked deeper in the fundamentals and may have arrived at the conclusion that the company’s CGM solution isn’t as groundbreaking as it initially appeared.

Personally, I’m going to take a pass on this as it seems the hype is beginning to fade. Still, if you want to take a shot, it’s not an unreasonable speculative opportunity. Definitely, if the FDA grants approval (and quickly), SENS stock can hit another plateau.

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

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.

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