- Bionano (BNGO) made solid progress with its business last year.
- It is building a robust ecosystem with a recurring revenue outlook.
- Potential risks remain, but BNGO stock still has upside potential.
Bionano Genomics (NASDAQ:BNGO) stock has taken its shareholders on a rollercoaster ride over the past couple of years. Right now, BNGO stock trades at around the same price as it did before its massive break out to begin 2021. In turn, with this incredible performance last year and its massive potential in genomic analysis, it could be a multi-bagger in the future. Nevertheless, the stock isn’t for the faint of heart and is perhaps best suited for risk-taking investors — and here’s why.
The healthcare diagnostics firm has attracted a slew of conflicting opinions from market experts and investors. And while some believe in the long-term value of its pioneering genome analysis technology, others might see the enormous risks associated with its business.
Of course, investing in firms such as Bionano will always come with a ton of risks. However, the upside potential of its business is immense — and with a debt-free capital structure, it can turn on the afterburners with its expansion plans.
Another Impressive Quarter
Bionano wrapped up another solid quarter after posting double-digit top-line growth in its third quarter. Its fourth-quarter sales of $6.3 million grew by 58% from the prior-year period. Moreover, they comfortably surpassed analyst estimates of $5.6 million for the quarter and the company’s preliminary projections in January. And its genome-mapping tool called Saphyr saw a 69% bump in installations last year compared to 2020.
Furthermore, for full-year 2021, the company’s sales shot up 111% from 2020 to $18 million, beating average analyst estimates of $17.3 million. Also, for 2022, the company predicts another 33% to 50% increase in sales.
However, perhaps the most exciting bit about the company is its business model, which can effectively lead to massive recurring income over time. In turn, the additional revenues can be used to develop new products and add to its competitive advantages. Saphyr can be used for various research and clinical niches, and the data output presented by the device is irreplicable, according to Bionano’s management. Therefore, Saphyr offers major competitive advantages at this time, giving it an edge over its competition.
Additionally, the company wants to build a sticky ecosystem of consumable products for its devices. In turn, preparation kits and sample chips are necessary for use with Saphyr, and these consumables will be an ongoing purchase for users. Thus, these essential tools can become a huge source of recurring revenue for Bionano in the future.
Shoring Up Finances
Bionano did well to cash in on its meme stock popularity and raise capital through issuing new shares. Its equity offerings diluted its stock by almost two-fold in 2021. But, the capital allowed the company to pay off debts and subsequently invest in its research and development (R&D) efforts.
Before the pandemic, Bionano had a relatively decent balance sheet, with $17.3 million in its cash till. However, it wasn’t nearly enough to fund its lofty development plans. Hence, it was left with no option but to dilute its shareholding from 28 million shares in the fourth quarter of 2019 to 289.6 million. This represents a share dilution by tenfolds in a span of just a couple of years.
Nevertheless, it paid off $14.9 million in debt by the first half of 2021 and completed several acquisitions. Hence, Bionano had a sizeable cash balance of $24.6 million and $226 million in saleable securities after the fourth quarter. Its internal funds will come in handy in catering to its rising R&D and other expenses, which widened its net loss by 76.2% in 2021.
Bottom Line On BNGO Stock
Overall, Bionano has been experiencing healthy momentum in its business in the past few quarters and has put forward highly encouraging guidance for this year. The company has immense potential to establish a leading position in genomic sequencing, assuming a more widespread adoption in the coming years.
Nevertheless, the risks are evident with the stock. Particularly, the firm’s penchant for diluting its shares is worrying for long-term investors. And given that profitability is still years away, it will continue diluting its shares further to fund future growth. Therefore, if you’re looking for a stock with healthy upside potential and could tolerate share dilution moving forward, BNGO stock could be an interesting bet for you.
On the date of publication, Muslim 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
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.