Its very rare when a stock price skyrockets five, ten, or even twenty times in a short period of time. They are the unicorns of the stock investing world. But that's exactly what has happened with Bionano Genomics (NASDAQ:BNGO) stock.
After moving sharply lower since its September 2018 market debut, the stock came to life late last year. A little more than two years later, Bionano Genomics shareholders are now sitting on a former penny stock that is incredibly trading above its $10 IPO price. To say the least, it was a move that few saw coming.
What is behind this Cindarella story? Are investors that jump in now too late to the ball or can the party continue?
What Does Bionano Genomics Do?
While short term traders may care more about the amazing technical show that Bionano Genomics has put on, behind the curtain is a San Diego-based company that makes life sciences instruments used in genome analysis. It sells imaging instruments, chip consumables, reagents, and data analysis software to scientists and clinics that conduct genetic research.
The tools and services provided by Bionano Genomics are based on its Saphyr system. The instrument provides diagnostic testing for patients with autism spectrum disorder (ASD) and other neurodevelopment disabilities by detecting variations in the human genome. The benefits for healthcare providers and patients are faster diagnosis and treatment.
Why is Bionano Genomics Stock Up?
The unlikely run started on December 23rd when a Festivus miracle sparked a rally from $0.55 to $0.77. A week later the stock was trading above $5 as the euphoria set in. But the move was certainly not without its merits.
The company's Saphyr system has gained immense credibility following a series of presentations and publications around the potential of the technology to be a game changer in the fields of cytogenetics and genomics.
The optimal genome mapping (OGM) system was featured at the annual meeting of the Association for Molecular Pathology (AMP). It showed the system's ability to identify a wide range of diseases and genetic disorders such as autism, amyotrophic lateral sclerosis (ALS) and Duchenne muscular dystrophy (DMD). From there the buzz spread.
More news about the potential of the tool to be widely used by researchers and health care professionals caused the stock to catch fire.
A 180-day extension granted by the Nasdaq exchange for the company to regain compliance with listing requirements helped set the stage for a sustained rally.
Then the stock caught its breath for a few days. But with demand for Bionano Genomics shares still far outstripping supply, the stock got a second wind and doubled to around $10. News about Saphyr's potential to identify genetic drivers of COVID-19 susceptibility garnered even more attention from investors.
There was increased awareness of the stock at the retail level. A company that no one had heard of was suddenly among the top 100 stocks traded on Robinhood.
Last week the news kept coming. Bionano Genomics issued a press release highlighting an MD Anderson Cancer Center publication that showed the ability of Saphyr to reduce the time needed to diagnose patients with myelodysplastic syndrome (MDS), a form of cancer associated with bone marrow blood cells.
As the herd mentality set in, not even a secondary share issuance could slow things down. Bionano Genomics filed an automatic mixed securities shelf on January 20th. The $230 million offering of more than 38 million shares at a price of $6.00 closed earlier this week. Since this dilutes existing shareholders, the market reacted unfavorably…but not for long.
After a small drop on the January 20th, the magical rise has continued. The stock climbed as high as $13.65 on January 25th.
Is it Too Late to Buy Bionano Genomics?
Bionano Genomics is now trading around $12 per share. Given the non-stop wave of positive headlines around the Saphyr system, it may be foolish to get in front of this moving train. Yet while it could find another gear, things seem to be slowing down.
A look at the weekly chart shows that trading volume has slowed to a relative crawl. Since 1.6 billion shares traded hands in the shortened New Year's Day holiday week, volume has declined in each week thereafter. This is often a sign that a rally is running out of gas.
Late last week the analyst at Maxim Group maintained a 'Buy' rating on Bionano Genomics and gave it a $14 price target citing the long-term prospects of Saphyr being mass adopted by the genomics market.
But with the stock having soared more than 1,000% since late December, the upside may be limited in the near term. This risk-reward seems skewed to the downside and we may see a bout of profit taking in the weeks ahead.
So, while keeping an eye on Bionano Genomics stock is worthwhile, it is probably too late to crash the party. However, traders that missed out on this unicorn can still take away a valuable lesson. Sometimes when a stock spikes dramatically on heavy volume, it’s a signal to investigate why. If there is a compelling fundamental story attached to it, it may be only the start of an extraordinary run.
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