The recent highlights section of Bionano Genomics’ (NASDAQ:BNGO) 2021 first-quarter report said it all about BNGO stock. In the quarter ended March 31, the company shipped 11 Saphyr systems, more than double the same period last year. With this quarter, Bionano has raised the installed base to 107.
Additionally, Bionano sold 2,603 nanochannel array flow cells during the quarter, which is 275% higher than last year. It all translated to $3.17 million in product and service revenue during the quarter, 179% higher than in Q1 2020.
No wonder CEO Erik Holmlin called the quarter a strong start to fiscal year 2021.
“2021 is off to a solid start for Bionano. In the first quarter, we sold a record number of flow cells, analyzed a record number of samples in our service lab, drove broad adoption of Saphyr instruments and ramped up the installation of Saphyr systems that weren’t yet operational because of 2020’s travel restrictions,” Holmlin stated in the company’s press release.
As I write this, BNGO stock is up more than 20% since the announcement, lifting its share price out of penny stock territory. That, in itself, is excellent news if you are a shareholder.
The big question is whether it can keep up the momentum.
BNGO Stock Is Headed Back to $10
InvestorPlace’s Louis Navellier discussed Bionano before it released its Q1 2021 results. Essentially, Navellier rightly argued that if it were to beat analyst estimates for the second consecutive quarter, BNGO stock would be off to the races.
Well, analysts were expecting a loss of five cents a share. It delivered a loss one cent better at four cents. The stock took off.
Add in a strong balance sheet, a growing legion of buyers for its Saphyr systems, and Lineagen, the company’s August 2020 acquisition that increased its Q4 2020 quarterly revenue by about 35%, and you’ve got the makings of long-term capital appreciation.
In the first quarter, according to pg. 18 of its 10-Q, Lineagen generated $851,000 in revenue. That’s 27% of Bionano’s overall quarterly revenue and 88% of its service and other revenue growth.
Bionano paid $1.7 million in cash for Lineagen, issued 6.17 million shares of its stock, and assumed $2.9 million in liabilities. In August 2020, the deal was valued at $9.6 million.
That works out to approximately 81 cents per BNGO share for those 6.17 million shares. As I write this, the Lineagen shares are worth almost $33 million, a 560% increase over less than a year.
Bionano’s trailing 12-month cash flow from operating activities is -$44.2 million. It finished the first quarter with $362 million in cash on its balance sheet. The company has enough cash to keep increasing optical genome mapping with Saphyr globally.
It might not get to $10 tomorrow, but there’s enough in the hopper to ensure BNGO stock gets there in the next 12 months.
Bionano Will Continue to Drift Between $5 and $10
The company’s Saphyr systems are unquestionably gaining acceptance in the medical research community. For example, the University Health Network in Toronto, the largest hospital diagnostic lab in Canada, uses Saphyr. But Bionano still has a long way to go to become a profitable company.
In the first quarter, it had an operating loss of $11.16 million, 14% higher than a year earlier. During the quarter, its operating expenses increased by nearly 22%. As its product and services revenue continues to grow, so too will its operating expenses.
At this point, it generates $3.52 in operating losses for every dollar of sales. That’s down from $8.59 in Q1 2020. Its margins may remain where they were in the first quarter, or they may move higher again.
Assuming it doubles its Q1 2021 sales and loses $6.10 per dollar of sales in the second quarter, it will have operating losses of approximately $38.6 million. Annualize that and the cash on the balance sheet could be gone in less than three years.
With that in mind, the risk for investors is still very high. A whole lot has to go right over the next few quarters to justify a $10 share price.
A Long Term Buy for Aggressive Investors
As I write this, BNGO is trading around $5.40.
Navellier made some excellent arguments for BNGO stock as a long-term buy. If you’re a very aggressive investor, enough has happened in recent months to justify a share price above $5. How much above $5 will be determined by its next quarterly report in August.
Until then, if you like BNGO, try to pick some up at $5.50 or less, thereby slightly improving your margin of safety.
I’m still not fully sold on the company, but I’m far more optimistic about its commercialization efforts compared to a couple of months ago.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.