Bionano Genomics: Highly Speculative, High Upside Potential

I am neutral on Bionano Genomics (BNGO), as it has strong growth momentum, enjoys unanimous support from Wall Street analysts, and its average price target implies massive upside potential over the next twelve months. However, the company is a long way from becoming profitable and is highly speculative.

Bionano Genomics invests in diagnostic technology to detect various types of cancers. This puts the company in a unique position to perform well regardless of the state of the economy.

More importantly, its involvement in highly speculative and disruptive technological projects earns it the attention of investors from the WallStreetBets Reddit group and, therefore, there is more demand for its stock. This enables management to raise equity at better valuations to finance additional research projects.

Strengths

Even though it has become a meme stock, Bionano Genomics has a lot of positives going for it. For one, its technology sets it apart from competitors. The company focuses on the defection of genetic disorders by analyzing differences in chromosomes. It has developed a proprietary technology that can look for large structural variations responsible for causing diseases.

With that said, Bionano Genomics is still working on its technology and requires more money to fund its research and development activities. BNGO lost money last year because of pandemic-led disruptions to normal laboratory testing. Its operating losses increased to $37 million, which is worrying.

Results

According to Bionano’s Chief Financial Officer, Q3 was an excellent quarter for the company because it managed year-over-year revenue growth with a strong balance sheet of $326 million in cash and marketable securities. The company also sold 3,969 nanochannel array flow cells during the quarter, which ended on September 30, 2021. This represents demand for the company’s solutions.

Valuation Metrics

BNGO stock is very difficult to value right now, as it is not profitable and is not expected to become profitable for the foreseeable future. That said, revenues are growing rapidly, with a 106.3% increase expected for 2021 and a 50.9% increase expected in 2022.

If the company can successfully deliver on some of its ambitious research and development initiatives, it could make investors fabulously rich over time. However, it is very uncertain when if that will even happen.

Wall Street’s Take

Turning to Wall Street, BNGO earns a Strong Buy consensus rating based on three Buy ratings assigned in the past three months. Additionally, the average Bionano Genomics price target of $7.75 puts the upside potential at 291.4%.

Summary and Conclusions

BNGO stock is highly speculative, with a wide range of potential outcomes for investors over the long term. The company is engaged in highly ambitious – yet challenging – enterprises and therefore could potentially make investors rich but could also go bankrupt if it fails.

Wall Street analysts are unanimously bullish on the company’s prospects at present, and the average price target implies that the stock could soar over the next twelve months. That said, the company is far from being profitable, and the current macroeconomic environment is being particularly harsh towards high growth unprofitable stocks like BNGO.

As a result, investors should keep the risks in mind before adding shares and may want to add for a further margin of safety or even wait until the company has greater visibility towards becoming profitable, even if it means paying a higher price for shares.

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