A few months back, Reddit favorite Asensus Surgical (NYSEAMERICAN:ASXC) stock seemed to be running out of gas. But, in the past month, shares in the robotic surgery company have staged an epic recovery.
Even after surging more than 100% since mid-May, some may think it has even more room to run. Is this the case? Or, have investors gone too far with pricing-in the latest positive news? Using the past as a prelude, count on the latter.
Given its past missteps, whether this company is on the verge of finally “making it” is debatable. Shares could experience a big fall if reality fails to match up with expectations. And, even if the company is actually on the cusp of big success? Its current valuation more than accounts for it.
Yet, you may still find this to be a winning trade, if the current sentiment around this stock continues. In the near-term, its potential to turn itself around may be enough to keep shares on their current upwards trajectory. But, keep in mind that it won’t take much to send this back in the wrong direction.
Why Investors are Again Bullish on ASXC Stock
So, what’s behind the recent resurgence in investor excitement over Asensus Surgical? To some extent, you can chalk it up to the return of enthusiasm for the “meme stocks,” including penny stocks like this one, that came in went earlier this year. But, the biggest factor behind its strong rebound has been the spate of positive developments that have cropped up in recent weeks.
First, the company’s most recent quarterly results, released on May 11. For the quarter ending Mar 31, 2021, Asensus reported higher revenue ($2.1 million) compared to the prior year’s quarter ($600,000). Second, a bullish analyst call from H.R. Wainwright helped to fuel renewed interest as well.
Add in news of its inclusion in the Russell 2000 index, and the uptick in hospitals signing up to lease its flagship Senhance robotic surgical system, and it’s not hard to see why sentiment has shifted so quickly from negative back to positive. Investors are bullish on it once again. The company continues to release positive news. Working in tandem, it may be able to sustain its current trajectory in the near-term.
This could even mean a return to the prices it traded for earlier this year. That would be as much as $6.95 per share, more than double today’s prices. But, while this could still be a profitable trade for meme stock investors, it’s hardly a slam-dunk. Still trying to recover from its past stumbles, investor sentiment for this stock could revert back to its prior negative status.
Asensus’s Turnaround is Still a ‘Wait and See’ Situation
ASXC stock may seem like it’s set to continue on its upward surge, as its Senhance product attempts to finally find success. But, before you run out and buy it, keep one thing in mind. This company has a history of falling far short of investor expectations. As I broke it down back in February, when it was still known as TransEnterix, I discussed how Senhance is not a new product.
It first debuted in 2018. At the time, investors expected it to become a massive hit. In turn, they bid up the stock to a split-adjusted price leaps and bounds above where it trades today. But, with physicians not impressed with it, it failed to generate a meaningful level of sales. This resulted in the stock’s tremendous fall, and its languishing at penny stock levels.
Now, that’s not to say history is going to repeat itself here. As InvestorPlace’s Dana Blakenhorn discussed May 31, Asensus has been for months spinning a narrative that the latest, greatest version of Senhance is set to give the current popular robotic surgical platform, Intuitive Surgical’s (NASDAQ:ISRG) DaVinci, a run for its money. Right now, it’s too early to tell if this is mostly hype. Or, if this product has what it takes to become as popular as the current market leader, which already generates over $1 billion in annual sales.
Yet, even if it does hit this level of success, much of this potential is already factored into the valuation of ASXC stock. At today’s prices, the company’s sports around an $800 million market capitalization. Even as it currently generates a minuscule level of sales.
Bottom Line: Tread Carefully, If You’re Looking to Ride its Latest Meme Stock Rally
With Asensus, valuation and turnaround execution concerns could continue to take a back seat. In the near-term, shares may have a path to get back towards their prior highs (around $7 per share).
For those looking for short-term trades, this could still end up being a profitable opportunity. But, considering its history of disappointments, don’t be surprised if sentiment for ASXC stock once again turns on a dime.
On the date of publication, Thomas Niel 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.
Thomas Niel, a contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.