This past year has been a rough one, to say the least, for investors in Bionano Genomics (BNGO).
After surging to more than $15 per share on the meme mania we saw take place in Q1 of last year, BNGO stock has been on a steady decline. This stock now trades around $2 per share, a marked decline from its previous high.
This stock’s volatility, like many retail favorites, has created incredible near-term price swings that have made some traders a lot of money. However, many who bought into the hype may have gotten hurt playing this rather volatile stock.
A genomics company, Bionano provides various genome analysis tools and services to clinicians. The company’s proprietary Saphyr system is one that investors have hoped will speed up the ability for researchers to find novel therapeutic solutions to chromosomal-related diseases.
This company’s noble mission is one many investors can and have gotten behind. However, Bionano’s valuation has been a cause for concern among bears who believe this stock is overvalued.
Is a new climb to all-time highs possible? Perhaps. However, I’m currently taking a neutral position on this stock until Bionano can prove its core technology can gain more traction.
Let’s dive into what investors are watching with this stock right now.
More Use Cases Provide Bullish Anticipation
One of the key catalysts many investors have looked for with Bionano is validation that the company’s Saphyr system can truly be the innovative solution the genomics field needs. In late September, Bionano announced the publication of its largest-ever data set. This research study on genome mapping focused on individuals with muscular dystrophy. The scope of the study was to determine whether OGM (optical genome mapping) could be a viable alternative to Southern blot analysis for chromosomal abnormalities.
In other words, the company’s Saphyr technology could disrupt an entire sector, or, at least, how things are done presently.
Various high-profile investors such as Cathie Wood have touted genomics as one of the key scientific revolutions underway. Indeed, this is a space many investors are watching closely. Despite some progress made with OGM for genome mapping, investors seem to be demanding more in the way of validation for this technology before jumping in with two feet.
Leaving the Meme Stock Tag Behind
It’s perhaps crystal clear, in hindsight, to see that the rapid increase we saw in BNGO stock early last year was nothing but a short-term mania, driven by retail investor sentiment. This relatively small-cap stock surged into mid-cap status without meaningful revenues. Like many story stocks, Bionano’s upside potential overrode the necessity for solid fundamentals to lure investors in.
However, times have changed. Investors are now valuing such companies on the basis of their actual earnings and balance sheet strength. Furthermore, rising interest rates reduce the value investors can place on the company’s earnings, which will mostly come in future years. For the valuation of companies like Bionano, that’s not helpful for this stock’s net-term trajectory.
The removal of the meme stock tag from BNGO thus could be viewed in two ways. On the one hand, retail investors no longer have the near-term moon shot catalyst they once relied on for gains. However, long-term investors who truly believe in this stock now have a much more attractive entry point to gain exposure.
Thus, for BNGO stock, it’s really a question of how this company executes that’s likely to determine its value moving forward. For many, making such assumptions is too speculative to engage in. Fair enough. However, the market has determined that this technology could be game-changing, given Bionano’s current market capitalization of around $560 million.
Wall Street’s Take
Turning to Wall Street, BNGO stock is a Strong Buy. Out of three analyst ratings, there are three Buys.
The average Bionano Genomics price target of $11 implies 467% upside potential. Analyst price targets range from a high of $12 per share to a low of $10 per share.
Bottom Line
There’s both a bullish and bearish case that can be made for Bionano right now. Indeed, this is a stock that’s hard to put a valuation on for the explicit reason that its (potential) cash flows are likely years away. As investors de-risk their portfolios, BNGO stock could be one that’s met with more selling than buying pressure, at least in the near term.
However, there’s also an intriguing longer-term bull case that can be made with this stock. Genomics is certainly a burgeoning space with lots of potential. If Bionano can prove its technology is superior to its competition, there’s a lot of money to be made.
It’s up to investors to decide which side of the fence they’re on.
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