Zomedica Is an Excellent Spec Play After Falling

Zomedica (NYSEAMERICAN:ZOM) is not having a good time. Retail investors have by and large thrown in the towel for the pet health care company. ZOM stock was recently changing hands for 58 cents, a far cry from the 52-week high of $2.91 per share.

Persian cat with veterinarian doctor at vet clinic
Source: didesign021 / Shutterstock.com

Now, does that mean it is time to abandon ZOM stock? Here it gets a bit tricky.

If you’re a speculative investor and have capital that you can afford to lose, ZOM is still a good bet. Part of that has to do with the news-sensitive nature of meme stocks. A positive or negative press release can have a massive impact on returns.

The other major issue is short interest. As I write this, short interest is below 10%, which will not appeal to investors.

ZOM has outperformed the S&P 500 by 221.9% and its sector by 232.1% in the past year. Although the stock has lost value, it is still not enough for you to be interested just yet. Catalysts are there. And the management is conscious of making hay while the sun shines, issuing a decent amount of equity to drum up cash.

Plus, vet care was estimated to be a $31.4 billion market in 2020, meaning the total addressable market is huge. For now, only those wanting to trade for the short term should look into this one.

ZOM Stock: Oscillating Fortunes

Zomedica has had an interesting time as of late. First, it launched the flagship Truforma machines, a blood testing kit for veterinarians based on bulk acoustic wave (BAW) sensors from Qorvo (NASDAQ:QRVO). Back in March, Zomedica made its first commercial sale of Truforma. But since then, there has been no traction.

Zomedica has outlined its desire to build a direct sales team and aggressively pursue commercial leads. Greg Blair – the new vice president of business development – will be an important lynchpin in this strategy. He brings some experience to the table, having previously served at Elanco Animal Health, completing more than 40 animal health care company transactions.

By the end of this year, Zomedica expects to have 15 direct sales representatives, and next year the company plans to take the product international. Understandably, there is skepticism. Building a robust sales infrastructure requires significant time and expertise.

Getting Impatient

Like several other meme stocks, Zomedica issued a lot of equity to take advantage of the skyrocketing price. As a result, Zomedica is sitting on more than $276 million in cash at the end of March. With that kind of cash, management can afford to pick their spots.

But understandably, investors are getting restless.

They want to see results and fast. Otherwise, in a fast-moving market, investors weigh their options, take profits and look to invest elsewhere.

Zomedica has a long road ahead. It is pursuing a direct sales strategy, and therefore it will have to recruit, train, and then monitor the sales efforts of a geographically dispersed sales team. Developing sales expertise requires time and effort, which can ultimately prove to be quite costly.

An Interesting Short-Term Play

During the pandemic, we saw an unprecedented increase in pet adoption. This is leading to robust growth in the pet health and welfare markets. However, it does not explain why ZOM stock is up 265.3% in a year.

Instead, ZOM stockholders should be thankful for Reddit, which drove the company’s market cap to an astounding $1.85 billion in mid-March. For a company with zero revenues and a widening loss, it was a truly remarkable number.

Still, things are getting back to normal now, with the market cap at a more reasonable $564.16 million.

Although the market cap still does not reflect its fundamentals, it gives you a better price point if you want to trade the stock for short-term profits.

On the publication date, Faizan Farooque 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.

Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience analyzing the stock market and was a former data journalist at S&P Global Market Intelligence. His passion is to help the average investor make more informed decisions regarding their portfolio.

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