At first glance, Bionano Genomics (NASDAQ:BNGO) might appear as the perfect investment for our times. On paper, BNGO is cheap, just under $7 a pop.
That alone gets you in the door these days. But Bionano really sets itself apart with fundamental substance.
As our own Muslim Farooque explained, “Bionano is a life sciences company that provides instrumentation for genome analysis. Its flagship product is called Saphyr, a platform that accelerates the discovery of new diagnostics and therapeutic targets. Therefore, it streamlines the discovery pathways for chromosomal changes. The company offers four main products: data solutions, prep kits, Saphyr and Irys.”
Of course, the investment sector values potential more than just the pure science. But this is also where BNGO stock appeals to speculators. Back in 2016, Grand View Research estimated that the global molecular cytogenetics market size reached $1.5 billion. Two years later, the research firm estimated that by 2025, the sector will hit $3.8 billion.
Over the forecasted period, this translates to a compound annual growth rate of 10.4%. But because of the novel coronavirus, the cytogenetics market could generate even more upside for BNGO stock and its ilk.
In the years leading up to the pandemic, the main challenge for cytogenetics was “to bridge the gap between clinical applications of genetic findings and accordingly provide a refined medical service,” according to Grand View Research. Thanks to the unprecedented push to develop treatments and vaccines for Covid-19, innovative platforms received more attention and funding.
As Farooque pointed out, Bionano’s Saphyr demonstrates similar efficacy with competing cytogenetic methods but at lower costs. Further, recent studies on Saphyr alludes to its effectiveness in coronavirus and oncology research.
It begs the question, with so much fundamental relevance, why are Bionano shares not performing to expectations?
Investors Need Convincing on BNGO Stock
Over the long run, BNGO stock could very well be a strong investment. Primarily, I say this because the U.S. and many other nations were caught off guard with the pandemic. We’ve had other outbreaks before: SARS in the early 2000s, Ebola between 2014 and 2016, and more recently the Zika virus.
They were all serious. But they never reached the point of calamity. Therefore, the global community may have gotten a bit too complacent, particularly here in the U.S. Well, we won’t get caught with our pants down ever again. Strategically, this bodes well for BNGO stock.
Already, scientists are now forecasting where the next pandemic might originate and are taking steps to mitigate the issue before it becomes a worldwide crisis. Moreover, it’s likely that we’ll see greater cooperation among international health agencies. After all, an ounce of prevention is worth a pound of cure.
Despite the underlying positives, investors still need assurances that their money won’t be put to waste. Here’s where the situation gets tricky. Financially, Bionano isn’t bringing home the best numbers, with revenue in 2020 down 16% from the prior year while net income losses have widened by 38% over the same period.
But what’s really bothering traders is the technical circumstances. On Jan. 4, BNGO stock closed at $7.20 on high volume (nearly 584 million shares traded). Since then, volume for both positive and negative sessions have faded dramatically.
This tells me that a lot of money is concentrated around the $7.20 price point. Sure enough, this level acted as support in early March and late March. Then, when BNGO stock fell through this threshold in April, the $7.20 price acted as resistance.
In my opinion, the more shares linger below $7.20, the likelier it is that BNGO could encounter a sizable correction.
If You’re Going to Trade, then Trade
Here’s my controversial take on BNGO stock: I don’t think the science matters, at least not now. From what the charts are telling me, if the science did matter, shares wouldn’t be all over the map. That’s basically what my InvestorPlace colleague Nicolas Chahine stated not too long ago. Simply, the equity unit is too wild for its own good.
Therefore, if you’re going to trade BNGO stock, then approach it as a trade. If you want to buy it as an investment, I would wait. There’s a lot of speculation that needs to be worked out before it becomes a reliable name.
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.