For a short while, it was some investors’ best friend. More recently it’s proven a dog with fleas. I’m talking about Zomedica (NYSEARCA:ZOM). But can ZOM stock learn a new trick and greet today’s investors with profits?
Let’s see what’s happening off and on the price chart of Zomedica, then offer a well-aligned risk-adjusted determination.
From “bow wow!” to simply “wow!” and back in the doghouse, it’s been a wild year for veterinary diagnostic outfit ZOM stock. Blame it on Reddit’s notorious message boards such as Wallstreetbets. Many already have.
And alongside short-lived squeeze trades in GameStop (NYSE:GME) and AMC (NYSE:AMC) or lower-priced, pump-and-dump operations like Sundial Growers (NASDAQ:SNDL) and others, the accusatory finger pointing in ZOM’s direction wouldn’t be entirely misplaced.
ZOM Stock and the Buzz
ZOM’s skyrocketing share price in early 2021 certainly enjoyed a low-hanging fruit starting point of less than 25 cents. That’s right up there with the best of them or rather, stocks on life support.
What’s more, the message boards of Reddit were apparently buzzing over ZOM and making sure Wall Street, or rather, other swing-from-the-fence type traders, would help the cause.
It worked too. Zomedica shares soared by more than 1,100% by early February to a high of $2.91. Today is a different story though.
A Big Retreat
As with most of 2021’s fast-money theme trades, shares of ZOM retreated in a big way. At a price of around 83 cents, Zomedica ’s bullish animal spirits have been declawed by roughly 76%. The good news is the message boards may not have been entirely wrong in hyping ZOM stock. For investors with a slightly longer time horizon, Zomedica does have a game changer in its possession.
This past March, the veterinary diagnostic company began a limited rollout of Truforma. Truforma is the first marketed point-of-care diagnostic platform capable of testing for thyroid and adrenal-related health issues in dogs and cats. And that means the opportunity exists for less-timely and costlier off-site lab results to become a thing of the past.
Success won’t happen overnight, of course. Vets need to get on board. And that’s only going to happen through a sales process that takes time. But ZOM stock has a war chest of cash to get easily through 2023 and on its way toward a meaningful outcome for Truforma.
Best Foot Forward
ZOM is also smartly putting its best foot forward in other ways, too.
The company just hired Greg Blair as its VP of business development. With leadership experience at Eli Lilly (NYSE:LLY), Johnson & Johnson (NYSE:JNJ) and Intuitive Surgical (NASDAQ:ISRG), ZOM’s new exec’s transactional experience and industry knowledge should be another tailwind for ensuring Truforma’s success.
Lastly and in getting the word out on Truforma, why wouldn’t vets get on board, right? OK, maybe given our own healthcare system, that’s not a great question to pose. But if we can swallow the idea of clinics using Truforma, the doghouse which ZOM stock finds itself in should prove a windfall for investors over time.
As InvestorPlace’s Mark Hake laid out in front of Truforma’s launch, a reasonable 15x sales multiple and 10% of the market could reasonably power ZOM stock up to $3.61. And from today’s price tag of 84 cents, that looks fetching, even as a more speculative investment.
ZOM Stock Weekly Price Chart
Source: Charts by TradingView
To be fair, ZOM’s decline is hardly surprising. Reddit’s promotion scheme has long since packed its bags and moved onto the latest and greatest, next big thing. So, there’s that. As well, broader and persistent investor aversion to riskier stocks since February also worked against Zomedica.
Still and optimistically, the occasion for a purposeful buy in ZOM which doesn’t bite back could be close at hand.
Technically, today’s deeper correction is shaping up as a possible double-bottom pattern. This week, shares have been confined to an inside candle pattern after finding support for a second time off the 76% retracement level over the past month.
For now, simply monitoring ZOM stock for confirmation of last week’s pivot low makes sense. To substantiate a bottom shares need to trade above 89 cents. To further verify an actual purchase, I’d strongly suggest waiting on a bullish stochastics crossover.
Should those conditions be met, I’d also advise setting a stop beneath the pattern low and taking partial profits if investors see ZOM run again towards $1.50 to $1.75 and before hopefully moving onto bigger and better things.
On the date of publication, Chris Tyler 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.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
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