Bionano Genomics (NASDAQ:BNGO) stock is one of many “meme stocks” still popular with retail investors. At first glance, the life sciences company looks like your garden variety Reddit play. Commanding a nearly $2 billion market capitalization at today’s prices, against projected 2021 revenues of $16.1 million, it appears to be a name that will completely pull back, once the meme stock/Reddit stock phenomenon runs its course.
In fact, it seems a lot like another r/WallStreetBets favorite, Zomedica (NYSEAMERICAN:ZOM). One may be in genomics, while the other focuses on veterinary health. But, in many ways, the two have a lot in common.
Yet, there is one key difference. As InvestorPlace’s Dana Blakenhorn recently wrote, the stock has favorable analyst coverage, not just “pajama traders,” on its side. A recent bullish call on the stock highlights how its flagship platform could “disrupt” the genomics space. This will allow it to grab a large share of this multi-billion dollar industry.
Even so, based on projections, it’s still a long road ahead until this starts to happen. So, with years until the big payoff, what’s the best move? Sit tight for now. At some point, the short-term speculators in it now will get impatient, and will cash out, sending it back to lower prices.
BNGO Stock and its Similarities to ZOM Stock
Bionano and Zomedica focus on completely different areas of the healthcare sector. But, the “story” behind both “story stocks” seems very similar. For starters, the hype around each one has been driven by the potential success of their flagship products.
In the case of BNGO stock, it’s the buzz surrounding its Saphyr optical genome mapping instrument. For Zomedica, shares took off in anticipation of its Truforma veterinary testing platform. But, that’s not where the similarities end. With both, bulls believe these flagship products could capture a large share of multi-billion dollar markets. This is why each one trades at a valuation out of sync with recent results.
Both names have taken off in 2021 due to similar factors. However, the bullish conviction from one sell-side analyst (BTIG), that Blankenhorn mentioned in his recent article, may signal there’s more than just Reddit hype at play with this stock.
In other words, don’t expect shares to fully give up their gains, once the meme investing trend fizzles out. That being said, shares could still pull back from today’s levels in the coming months. Namely, due to this bull case being years in the making.
What’s The Takeaway from BTIG’s Bullish Call?
On Jun 16, BTIG’s Sung Ji Nam initiated coverage on BNGO stock. Giving shares a “buy” rating, the analyst also set a price target of $10 per share. This may be lower than the highs it set back in February ($15.69 per share). But, it’s a fair amount of possible upside, compared to the $7.15 per share it trades for today. Nam’s rationale? Its potential to see its revenue soar, as Saphyr disrupts the $2-$3 billion genomic research market.
So, does this sell-side conviction bolster the bull case? Yes and no. The sentiments expressed by Nam in his coverage reiterate what’s already been known about Bionano. That is, good chance Saphyr’s mapping technology has a technological edge over the sequencing method used by rivals, such as Pacific Biosciences (NASDAQ:PACB). This, in turn, could parlay into rapid adoption of its system. The question, though, is when this will happen.
Will it play out this year? Probably not, based on the above-mentioned $16.1 million revenue projection for 2021. It may not happen next year, either. Analyst estimates for its 2022 top line results range from $28.2 million to $36.3 million. This triple-digit percentage growth is by no means anything to sneeze at. But, given the expectations already priced into shares, it’s going to have to do a lot better than that.
For now, support for the stock from retail traders, boosted in the short-term by BTIG’s buy rating, may be enough to keep it elevated. Eventually, though, something will have to give. If it fails to wow investors in subsequent quarters, those long today will grow impatient, and a big sell-off could occur.
Bottom Line: Still Years Away from Big Time Success, Wait for Lower Prices
Bionano and Zomedica may be similar. But, while I’m skeptical about both, I’ll concede that this name has a bit more substance to it. If its mapping technology becomes the new standard in genomics, the bulls could be proven right, with the company growing substantially from its current size. But, that doesn’t necessarily make it a buy at today’s prices.
With the “story” behind it still years in the making, take your time with BNGO stock. At some point, its meme stock investors will cash out, sending it back to more reasonable prices.
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.