Founded in 2013 and publicly-traded since 2016, Zomedica (ZOM) is a relatively new organization. However, this veterinary-focused medical device company has seen tremendous interest among growth investors of late.
Why?
Well, there are a number of reasons for this. Among the core reasons for the surging interest in pet-friendly tech plays is the growth we’ve seen in pet adoption rates throughout the pandemic. As owners are discovering, a pet adoption is a multi-year (or even multi-decade) long commitment. Accordingly, the revenue streams veterinary-related businesses are likely to see in the years to come could be quite enticing.
ZOM stock surged earlier this year alongside other high-growth meme names, to nearly $3 per share. To put this in context, Zomedica’s share price started the year at the $0.35 level. Currently, however, the stock trades at around $0.50 apiece.
Let’s dive into whether this company’s growth trajectory can be restored, and what the future holds for ZOM stock.
Market Growth Potential
Zomedica’s core product, its TRUFORMA in-clinic biosensor diagnostics platform, is the key driver that investors in ZOM look to for growth.
TRUFORMA is a relatively new diagnostic testing system for vet offices. It enables vets to conduct tests at their places of business, rather than sending customers to a laboratory and waiting for results. That’s better for the vet office, and better for customers. Everyone wins.
As per vet websites, it can take several days to around a week for a laboratory to process diagnostic results. Pet owners seek results quickly. Here, TRUFORMA would provide vets with that capability, for several types of tests.
This diagnostics tool looks to disrupt a global veterinary diagnostic services market that is large and growing. Estimates are that this market will grow from an estimated valuation of $2.5 billion in 2021 to a projected value of $3.9 billion in 2026.
That’s some decent growth.
Of course, investors who believe that Zomedica will be able to capture a significant chunk of this market have been tempted to consider this early-stage company at these levels. At nearly $3 per share, however, Zomedica’s valuation became close to approximating the overall value of the entire global market. Accordingly, a cooling-off period appears to have been in order for this stock.
Supplier Challenges
Zomedica had no revenue in 2020. This is because it is still in the early stages of commercializing its TRUFORMA product. In March, Zomedica did see the first commercial sales of its TRUFORMA system. However, the company’s share price declined alongside the company’s commercialization ramp up, for various reasons.
Indeed, the rate of this decline was remarkable. Zomedica went on a 60% slide over the next month. This appears to be largely due to issues the company saw with its rollout.
The company stated that an issue occurred with the supplier responsible for developing test assays. The unavailability of cartridges makes it challenging to sell the equipment. Zomedica further linked the adverse impact on the TRUFORMA system’s market acceptance to the delay in these assays.
Zomedica anticipates that the issues will be resolved by the end of this year. But meanwhile, it is paying for an expanded sales organization that is majorly spinning its wheels. Accordingly, it’s hard to look at Zomedica’s recent results positively.
Bottom Line
Zomedica is a company that has lost its luster, at least in terms of being considered a meme stock. Any sort of positive momentum the company had earlier this year appears to have waned.
That said, like other stocks that have rallied hard in a short amount of time, anything’s possible in terms of its future growth. (See ZOM stock analysis on TipRanks)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.
Disclaimer: The article was written by Chris MacDonald. At the time of publication, MacDonald did not have a position in any of the securities mentioned in this article. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
