Zomedica (NYSEAMERICAN:ZOM) is one of the stranger stock market stories of 2021. Until not that long ago, Zomedica was an obscure penny stock. The company develops a diagnostic platform for pets, but as of yet, had achieved little commercial success. In just a matter of weeks, however, ZOM stock blasted off, becoming a trading favorite.
What was behind Zomedica’s surge? Some folks credited confusion among traders thinking ZOM was the ticker for Zoom Video (NASDAQ:ZM). A video appearance by social media star Carole Baskin talking about ZOM stock certainly helped matters as well. And, thanks to high short interest, Zomedica got caught up in the short squeeze frenzy in January.
All in all, ZOM stock went from 10 cents a share in November to a high of $3 this year. Now though, Zomedica is struggling to hold the $1 mark. Traders turned particularly harsh toward the name last month; ZOM stock lost more than 30% of its value in April. So was Zomedica just a short-term fad, or is there still hope for ZOM stock going forward?
Zomedica’s Status Prior To Product Launch
A couple months ago, Zomedica released its fourth quarter and full-year 2020 results. For the year, Zomedica lost $16.9 million, or 5 cents per share. That was improved from 2019’s loss of $19.8 million. It’s nice to see the company exhibit solid control over its operational costs.
The company exited 2020 with $62 million of cash on hand. That alone would give the company more than three years of runway at 2020’s burn rate. This means that the company should be well-financed for the foreseeable future. And with the share price up so much in 2021, Zomedica should be able to raise more funds if necessary. Presumably the company’s overhead will grow considerably as it launches its product and hires more sales and support staff.
There has been some debate over whether Zomedica’s diagnostics platform, Truforma, is superior to rivals. This sort of thing can be hard to determine as outside investors. However, with Truforma now available to customers, we’ll soon get real market data as to whether veterinarians like the product or not.
Diagnostics Platform Is Now Live
Lost in all the excitement around Zomedica’s wild stock price fluctuations has been the roadmap to the company’s commercial launch. Last fall, Zomedica outlined a plan to start commercial sales by this spring. In January, Zomedica announced that Miller Veterinary Supply would be the first official distributor for Truforma. The company also set March 30 as the official deadline for its commercial launch.
Zomedica delivered ahead of schedule. On March 16, it announced its first commercial sale of Truforma to an independent customer. Building on that success, in April, Zomedica revealed that it is creating its own direct sales force to market Truforma. This appears to mark a transition away from Miller. In any case, Zomedica is still making moves to get Truforma up and running in the near-term. Within a couple of quarters, we’ll see whether Truforma finds commercial adoption or not.
ZOM Stock Verdict
There’s a big difference between the short squeezes in something like AMC (NYSE:AMC) and Zomedica. AMC is a legacy brand whose best days are likely far behind it and is now struggling to survive. Thus, the short squeeze there came on borrowed time, as the long-term value of that franchise erodes. Zomedica, however, is potentially still at the early stages of its commercial trajectory.
If the company’s diagnostics platform truly takes off, all this short squeeze excitement will just be a footnote in Zomedica’s history. In a way, all the trading frenzy is just a distraction. What really matters is whether or not veterinarians like the product, and whether management can execute on the promise here. And frankly, we don’t have all that much new data on either point since January.
If you bought the stock hoping for an even bigger short squeeze, you might want to sell. It seems clear that traders have moved on to other prospects already. However, if you bought into Zomedica for the fundamental story, there’s no reason to panic. Management still has a chance to deliver. The day-to-day swings in the stock price don’t make a difference there.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.