The art and science of stock market investing requires a tolerance for losing money on some of the shares you buy. But it's not unreasonable to try to avoid truly shocking capital losses. So spare a thought for the long term shareholders of Abeona Therapeutics Inc. (NASDAQ:ABEO); the share price is down a whopping 71% in the last twelve months. That'd be enough to make even the strongest stomachs churn. We note that it has not been easy for shareholders over three years, either; the share price is down 56% in that time. Furthermore, it's down 16% in about a quarter. That's not much fun for holders. But this could be related to the weak market, which is down 15% in the same period.
We don't think Abeona Therapeutics's revenue of US$482,000 is enough to establish significant demand. We can't help wondering why it's publicly listed so early in its journey. Are venture capitalists not interested? As a result, we think it's unlikely shareholders are paying much attention to current revenue, but rather speculating on growth in the years to come. It seems likely some shareholders believe that Abeona Therapeutics has the funding to invent a new product before too long.
Companies that lack both meaningful revenue and profits are usually considered high risk. There is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets to raise equity. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies go on to make revenue, profits, and generate value, others get hyped up by hopeful naifs before eventually going bankrupt. Some Abeona Therapeutics investors have already had a taste of the bitterness stocks like this can leave in the mouth.
When it last reported its balance sheet in December 2019, Abeona Therapeutics had cash in excess of all liabilities of US$84m. While that's nothing to panic about, there is some possibility the company will raise more capital, especially if profits are not imminent. With the share price down 71% in the last year , it seems likely that the need for cash is weighing on investors' minds. You can click on the image below to see (in greater detail) how Abeona Therapeutics's cash levels have changed over time.
It can be extremely risky to invest in a company that doesn't even have revenue. There's no way to know its value easily. What if insiders are ditching the stock hand over fist? I'd like that just about as much as I like to drink milk and fruit juice mixed together. It costs nothing but a moment of your time to see if we are picking up on any insider selling.
A Different Perspective
We regret to report that Abeona Therapeutics shareholders are down 71% for the year. Unfortunately, that's worse than the broader market decline of 0.8%. Having said that, it's inevitable that some stocks will be oversold in a falling market. The key is to keep your eyes on the fundamental developments. Regrettably, last year's performance caps off a bad run, with the shareholders facing a total loss of 7.7% per year over five years. Generally speaking long term share price weakness can be a bad sign, though contrarian investors might want to research the stock in hope of a turnaround. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. Like risks, for instance. Every company has them, and we've spotted 4 warning signs for Abeona Therapeutics (of which 1 is concerning!) you should know about.
Abeona Therapeutics is not the only stock insiders are buying. So take a peek at this free list of growing companies with insider buying.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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