Senseonics (NYSEAMERICAN:SENS) has been part of the frenetic trading caused by the Reddit crowd. And, even though I don’t endorse that hype, this isn’t a hatchet piece on SENS stock.
In fact, I think that as penny stocks go, it has a compelling story.
But right now, it’s not doing the company, or the stock, justice to talk about one without talking about the other.
There are two stories taking place with Senseonics that are in conflict with each other. Senseonics is bound to continue to have trouble until the conflict shakes out.
This is my first time writing about Senseonics. Much of the commentary I’ve read focuses on its current Eversense continuous glucose monitoring (CGM) system for diabetics. This is an implanted system that lasts 90 days without replacing.
As Louis Navellier informed investors, the 90-day window is appealing to insurance companies because it reduces the need for in-person visits.
The company is planning on global net revenue of between $12 and $15 million in this fiscal year. That would put revenue at a level it hasn’t been in three years. But the story gets better. Some early testing is showing that the Eversense device may be able to last as long as 180 days.
Then there’s this one nugget of information that I found in the company’s last earnings call. They are developing a version of the Eversense that would go 12 months without needing to be replaced.
If that were the case, Senseonics would have a game-changer on its hands and that’s even if, as Josh Enomoto wrote, patients would still have to do the finger stick test twice a day.
Now keep in mind that the Eversense device is not approved for a 180-day replacement cycle, and it’s unlikely that it will be anytime soon. So the idea that the company will have an implanted CGM that will last a full year is something that may take years to develop.
A Hammer Looking For a Nail
A key reason that Senseonics stock has surged higher this year is that it has been part of the “meme stock” trade. This trade has been going on for over six months. One emerging realization is that the short squeeze has become a hammer that investors are looking to swing at just about every nail they can find.
Senseonomics checked off a lot of those boxes. It is, and was, a penny stock that developed a high percentage of short interest. In other words, it had the ingredients for a sharp rise in price.
However, it also had a product that was going to benefit from the ease in pandemic-related restrictions, and that’s what made it appealing. Unfortunately, as has been the case with many of these meme stocks, SENS stock has overshot its mark. And you don’t want to be the greater fool.
The Opposing Truths of SENS Stock
Senseonics has a compelling long-term story that may be worth the wait. On the other hand, it is, for now, one of the latest nails for retail investors who are looking to profit from a short squeeze. In my opinion, that’s unfortunate because at a lower price, and with less volatility, SENS stock has some appeal.
Thomas Niel suggests that a price of $2 per share and perhaps even lower would represent an appealing price point for interested buyers. I would certainly suggest that interested speculators consider the opinion of the analyst community.
The current consensus 12-month price target is around $2.17, but that’s a pretty steep drop from the $3 price at which SENS stock is trading now.
As a short squeeze opportunity, SENS stock holds no appeal to me. That’s not my thing. But as a long-term opportunity, I’d keep the company on my watch list and wait for the short interest to taper off.
On the date of publication, Chris Markoch 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 Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019.
