I am neutral on Bionano Genomics (BNGO), as its rich valuation and lack of profitability offset its strong growth momentum.
Bionano Genomics is a genome analysis company that provides life sciences instrumentation based on its Saphyr system to geneticists, and provides diagnostic testing for people with autism spectrum disorders and other neurodevelopment disabilities. (See Bionano stock charts on TipRanks)
Strengths
Bionano Genomics has seen strong revenue growth driven by its Saphyr installed base growth, which was adopted by two large laboratories in the United Kingdom that belonged to the NHS.
Its Lineagen business has been offering genetic testing services for nine years, and has successfully performed 65,000 tests for people with neurodevelopmental concerns.
The company is well on track towards accomplishing all of its 2021 milestones.
Recent Results
Bionano Genomics reported financial results for the second quarter of 2021, ended June 30, and announced total revenue of approximately $3.9 million, showing an increase of 226% on a year-over-year basis, and beating analysts’ estimates of $3.3 million.
It reported operating expenses from $12.2 million in the first quarter to $17.9 million in the second quarter, and had outstanding cash and cash equivalents of $333 million, as compared with its cash position of $38.4 million at the end of the fourth quarter of 2020.
The company showed excellent performance in many areas, including rapid development in the cytogenetics markets, as well as higher global adoption of its products.
Going forward, Bionano Genomics hopes to introduce a prototype of a next-gen Saphyr System by the end of the current fiscal year. The company also expects to reach an installed base of 150 Saphyr Systems by the fourth quarter, showing a 50% increase when compared with the same quarter of 2020.
Bionano Genomics seems to be in strong position to meet or exceed its fourth quarter 2021 targets, and it should be interesting to see how far CEO Erik Holmlin will take the company.
Valuation Metrics
Bionano Genomics’ stock looks very expensive right now, given that the company itself is unprofitable.
For example, the company trades at 47.4x forward revenue, and is expected to generate an EBITDA loss of nearly $60 million in 2021.
Wall Street’s Take
From Wall Street analysts, Bionano Genomics earns a Moderate Buy analyst consensus, based on two unanimous Buy ratings.
The average Bionano price target of $10 puts the upside potential at 96.3%.
Summary and Conclusions
Bionano Genomics looks very expensive here, given its lack of profitability and high price-to-sales multiple.
On the other hand, it operates in a dynamic industry that is poised to benefit from rapid growth and development in the genomics space.
Last, but not least, Wall Street analysts seem quite bullish on the stock, as the consensus price target indicates nearly 100% upside potential in the stock in the coming quarters.
The company is enjoying strong growth momentum, and if it can become profitable in the near future, it could generate very attractive returns for shareholders. However, investors should keep in mind that it remains unprofitable, and therefore a higher risk investment.
Disclosure: At the time of publication, Samuel Smith did not have a position in any of the securities mentioned in this article.
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