Before delving into my opinions on investing in Zomedica (NYSEAMERICAN:ZOM) stock, it’s important to separate the stock from the company. I love pets, and anyone working on making them healthier is aces in my book. Management’s goal is to empower veterinarians with tools to better care for animals. This is a noble cause and I am pulling for them from that sense. They recently announced some good news, but sadly this is the extent of my excitement for ZOM stock.
The investing environment on Wall Street suffered a big blow from the shenanigans around GameStop (NYSE:GME).
I applaud the effort from the Reddit gang to take the fight to the hedge funds. But in the process they are making a mockery out of investing. Both sides are now rigging the game for the rest of us. Consequently, there’s an overt gambling flare to the process. It wasn’t perfect before, but now it’s in shambles.
Traditional investing involves doing homework to find opportunities before others do. These days we frequently see ZOM stock and others skyrocket out of nowhere and for no reason. Those giant whipsaws leave a trail of broken investor accounts.
Just after the GME spike, ZOM had its own wild ride to extreme highs without any fundamental catalyst. The profit-and-loss statement still shows zero revenues. Therefore, the stock price remains purely speculative in its entirety.
ZOM Stock Is Short on Substance Still
There’s a lot of that going around these days especially in the EV sector. Overly exuberant investors pay up for stocks solely on hope. In this case the company is making more headlines for its stock issuance news then products and services. In theory, I love the idea of a business tailoring to our beloved pets.
People don’t skimp when it comes to our furry friends. We are susceptible to emotional pressures that force us to spend big bucks to help Sparky. I can make a solid argument to catch the Chewy (NYSE:CHWY) falling knife. At least it has current metrics I can evaluate. I cannot do the same for ZOM, even though they have similar chart patterns now.
Those who insist on risking money on ZOM should classify it as a speculative trade not an investment. In addition, this would be an active one, therefore slower investors should completely opt out. Just a few months ago it was a penny stock. Then out of nowhere it rallied over 3,500% into the February highs. Since then it has given back more than half of it and it’s now a falling machete.
Technically, there could be hope for the bulls coming into $1 per share. This was a cluster that acted as a base for the February breakout. When a stock does that it often finds support. I hesitate to use the term “support” because here it’s very ginger at best. It won’t take much to slice right through it and fall below 60 cents per share.
This Is Not for Casual Investors
Opportunities like this are for seasoned active traders. The casual investor trying to scalp some profits will need extreme luck to beat the competition. From a regression perspective, this crash merely brought the stock back to the mean. It is very easy for it to overshoot lower before it finds real support under 50 cents per share.
As you can tell I’m not a fan of the opportunity here. But my beef is as a simple warning against potential losses. I am not here to dis the company.
Extrinsic factors like the meme trading fad carry downside risk, too. Manipulating a stock is illegal, yet the SEC has not done much about it. Unless they change the rules, I expect them to eventually intervene. If and when that happens, the interest in stocks like this one could dry up. Out of sight will definitely be out of mind.
I realize that the folks at Zomedica are doing their best to execute on their plans. I just worry about the casual investors getting into something potentially dangerous. A stock that has a low ticket price like this gives the impression that it’s low risk. However, the case still is that the maximum risk is a 100% loss.
The only way to trade something this wild is to have a plan with very specific stop loss triggers. Leave nothing to chance, gut or hunches.
On the date of publication, Nicolas Chahine did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Nicolas Chahine is the managing director of SellSpreads.com.