There is a very sound bull thesis building around NeuroMetrix (NASDAQ:NURO) stock following its price spike last month.
There’s quite a lot to like about the tiny Massachusetts company that’s developing three commercial products, the most notable of which is Quell. The latter product is a wearable device which treats lower extremity pain using neurostimulation.
Further, NURO stock spiked last month at a very interesting time, making it worthy of investors’ attention.
The Price Spike
On July 19, the shares of NeuroMetrix began to rise rapidly. Before that day, the stock had been flat for quite some time. The sudden rally looks to have been triggered by none other than Reddit traders.
Another InvestorPlace columnist, Brenden Rearick ,unearthed a plausible catalyst for the sudden spike. He uncovered a now-deleted post on r/WallStreetBets that could have triggered the rally:
“Get in on $NURO!!! You all talk about short squeezes and making hedgies pay, well more short positions were opened up because of the stock’s 200% run yesterday. If you want to burn shorts here’s your chance.”
The short interest in NeuroMetrix now sits below 1%, but at that time it was approaching the 20% threshold.
As a result, NeuroMetrix quickly climbed from $3 to $10 on July 19. But that isn’t the whole story. The price spike appears to have been an interesting coincidence. That’s because, on July 20, NeuroMetrix made an announcement that sent prices rocketing upward for the second consecutive day.
The FDA News
On July 20, a day after getting significant attention due to Reddit traders, the company announced more news that kept its momentum rolling.
The headline of the press release said it all: “NeuroMetrix Receives FDA Breakthrough Device Designation for Treatment of Fibromyalgia with its Wearable Neurostimulation Technology”
The company’s Quell device, alluded to earlier, received breakthrough designation from the FDA. The device treats the symptoms of fibromyalgia in adults. The company was quick to note that the breakthrough status does not indicate that the FDA has approved the device.
In any case, the news sent the shares from $10 all the way to $20 on July 20. You have to assume that the timing of the events was fortuitous for the company. After all, if traders hadn’t run to buy NURO stock on July 19, then the impact of the FDA’s designation would likely have been more muted because the name would have been less well-known.
That series of events has caused more investors to become interested in NeuroMetrix.
NeuroMetrix is a fairly healthy company with better financial results than most fledgling biotechnology firms.
NeuroMetrix continues to post attractive revenue growth. In the second quarter, its revenues increased 62.8% year-over-year to $2.213 million.
Its results through the first half of the year are similarly encouraging. In the first six months of 2021 NeuroMetrix’s sales jumped nearly 24% YOY.
That kind of trajectory is attractive. However, NeuroMetrix’s bottom line really looks interesting.
Biotechs’ net losses tend to compound quickly, and it is very common to see them climb dramatically from year to year.
NueroMetrix isn’t exhibiting that trend. The $1.5 million net loss that it recorded in the first half of 2020 fell significantly to a loss of just under $600,000 in the first half of this year. That’s nearly a two-thirds reduction and suggests that the company could even report profits soon.
NueroMetrix is focused on keeping its operations lean, and it has a medical device that could be a blockbuster. There’s a lot to like about this company.
On the date of publication, Alex Sirois 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.