2021 has been an exciting year for BioNano Genomics (NASDAQ:BNGO) investors. However, when it comes to stocks, excitement can cut both ways. A spectacular run started last Christmas eve. It saw BNGO stock go from being worth 71 cents to closing at $15.57 on Feb. 16. That’s 2,093% growth. Pretty exciting — especially if you bought shares early in that run. However, despite a few half-hearted rallies, it has been a downward slope for BNGO since then. Now trading below the $6 level, shares are well off that February high and down 19% from the start of the year.
That big correction is the downside of exciting growth. And it’s a hallmark of meme stocks. After the huge gains comes the inevitable correction. While BioNano shares currently earn a healthy B-rating in Portfolio Grader, there’s no downplaying the effect that retail investors on Reddit’s r/WallStreetBets have had on BNGO stock in 2021.
The question is, has that influence run its course? Here are a few thoughts on BioNano if you’re considering an investment.
The Reddit Effect Made BNGO a Meme Stock
A series of events kicked off last December that triggered BNGO stock’s huge surge. What really lit the fire, though, was the Reddit effect, which greatly amplified market reaction to the news.
First up was the Dec. 30 announcement that BioNano had been granted a 180-day extension to regain compliance with Nasdaq’s minimum $1 closing bid share price regulation. Just a week before that, BNGO shares had closed at 56 cents after spending most of 2020 as a penny stock.
The big catalyst hit on Jan. 4. With Redditors already talking up BNGO stock, the company put out a press release on Jan. 4. In it, BioNano announced its subsidiary Lineagen had successfully used genetic testing to identify risk genes in a high-functioning Autism Spectrum Disorder (ASD) patient. The results were seen to show the power of genetic testing and its potential to help through personalized treatment of patients. The company also announced more detailed testing was planned, using its Saphyr DNA analysis tool.
On Jan. 8, the company announced an $88.5 million stock offering.
On Feb. 9, Bionano announced Saphyr was being piloted by Toronto’s University Health Network Laboratory Medicine Program — the largest hospital diagnostic laboratory in Canada.
Through all of this BNGO stock kept shooting higher, in a classic meme stock reaction. That peaked days after the Toronto announcement, with a $15.57 close a week later. Then came the correction, which has continued for months.
Look Beyond the Meme Stock to Saphyr
The problem with BioNano’s meme stock status is that potential investors may not look past that label. However, there’s a lot to like about this company. Its past two quarters have shown increasing revenue as more hospitals and labs adopt its Saphyr system.
In its second quarter (reported at the start of August), BioNano’s revenue of $3.9 million was up 226% year-over-year. The company shipped 13 Saphyr systems during the quarter, bringing its install base to 121 units. That number is growing and has the potential to ramp up significantly. As InvestorPlace contributor Larry Ramer notes, Saphyr has big advantages over current DNA analysis technology in that it is faster, more detailed and tests are far cheaper.
Bottom Line on BNGO Stock
BioNano has found itself among the ranks of meme stocks, with retail investors on Reddit’s r/WallStreetBets having significant influence over the big movements in BNGO stock. Without the Reddit effect, it is highly unlikely that BNGO stock would have surged the way it did to start off the year. However, just because it is a meme stock doesn’t immediately invalidate it. BioNano Genomics has a compelling product in Saphyr.
Growing adoption of Saphyr by hospitals and researchers bodes well for the future of BioNano. That growing install base will continue to purchase consumables for their systems as well. We’re already seeing that effect in action with the company’s growing revenue over the past several quarters. In addition, the company has over $330 million in cash in equivalents on its balance sheet.
You do have to weigh the meme stock aspect of BNGO as part of the equation. There’s no doubt it adds not just excitement, but also volatility to the mix. However, despite the meme stock baggage, investment analysts are looking favorably at BioNano shares at their current valuation. Those surveyed by the Wall Street Journal have BNGO stock rated as a consensus “Buy” with a $11.50 price target. If you’re looking to add a biotech company that offers long-term growth prospects to your portfolio, you could do a lot worse that BNGO.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (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.
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