Zomedica (NYSEAMERICAN:ZOM) stock is down nearly 70% over the last year, though it had some spikes.
ZOM stock is also down nearly 50% in the trailing six months. That’s not enough for me to be comfortable with ZOM stock.
From what I gather from my InvestorPlace colleague David Moadel’s take on the deeply embattled pet diagnostics specialist, he’s not exactly going to bet the farm on Zomedica, either.
As he stated, the company’s financials aren’t ideal. Thus, on balance, he warns that “ZOM stock is a highly speculative investment, and investors should only take small positions in this stock.”
For emphasis, Moadel goes over the third quarter of 2021 earnings results, where “total revenue for those three months was $22,514.”
Quite a few individuals make that or more on an annualized basis and they don’t have supposedly groundbreaking pet diagnostics platforms to sell. My colleague felt the same, acknowledging how distracting the top line was.
Still, Moadel is quite the optimist, having written some bold contrarian articles in the past.
For ZOM stock, he mentioned that despite the unpleasant print, the underlying company’s acquisition of Pulse Veterinary Technologies, also known as PulseVet, should be worth examination, especially if you’re the speculating type.
In short, PulseVet “uses electro-hydraulic shock wave technology to treat a wide variety of conditions afflicting veterinary patients.”
On the surface, the concept sounds compelling. Through high-energy sound waves, the technology can reduce inflammation, increase blood flow, and accelerate bone and soft tissue development.
So, is it time to load up on ZOM stock? Maybe not quite yet.
ZOM Stock Needs a Robust Economic Recovery
Moadel expressed incredulity when he saw how little Zomedica generated on the top line for Q3. Personally, I expressed incredulity about this electro-hydraulic shock wave technology. If it’s as good as advertised, why isn’t ZOM stock soaring on the news?
Even on a year-to-date basis, shares are down nearly 7%, and we’re only two-and-a-half weeks into 2022.
However, I briefly looked into the technology and according to the Mayo Clinic, sports medicine practitioners are embracing the benefits of shock wave therapy.
Fundamentally, then, Moadel isn’t off base with his contrarian stance on ZOM stock. The underlying tech could be game-changing.
Still, I’m reminded of the adage, if something sounds too good to be true, it usually is.
My speculation with the PulseVet acquisition is that it may feature too many challenging cost structures to be readily viable. Otherwise, you’d imagine that the market will be all over ZOM stock, this time in a good way.
But irrespective of PulseVet, the overriding headwind with veterinary care is that, as the now-controversial Chamath Palihapitiya might say, it’s a “luxury” expenditure. People can wax poetic about how much they love their pets. Lessons from the last recession state otherwise.
As npr.org noted, many Americans were forced to give up their pets for adoption, to the chagrin of animal rights advocates. In other words, pets are family but when the smelly stuff hits the fan, they’re just animals.
Tread Extremely Carefully
To be fair, since the date that Moadel’s piece hit the internet, ZOM stock gained more than 6%. At the peak, shares swung up by more than 9%.
I’m not suggesting there’s a correlation nor am I downplaying what my colleague had to say. Again, it could very well be a game-changer.
Still, ZOM stock has been one of the closely tracked meme trades — or trades with meme-ish qualities — which means that it should absorb any and all pieces of good news.
Undoubtedly, those who monitor Zomedica have analyzed the PulseVet acquisition inside and out. They probably also shared the development across the blogosphere and back. Yet ZOM remains deeply troubled.
In conclusion, Zomedia seems a read-between-the-lines play. It has some compelling attributes to it. But with hardly any positive movement — shares are down about 67% for the trailing year — ZOM stock is simply too risky for most investors.
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On the date of publication, Josh Enomoto 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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.