Should Investors Think Twice Before Running After BioNano Genomics?
BioNano Genomics (BNGO) could change the game when it comes to the study of genomes (cytogenetics). But, after more than doubling in the past month, and surging more than 1,300% in the past six months, is it too late to buy BNGO stock?
The company may be on the cusp of something big. However, it’s hard to deny this isn’t already reflected in the current share price. This in and of itself isn’t an issue.
But what happens if BioNano stumbles at some point down the road? Or, if markets overall head lower, which could have an outsized negative impact on high-flyers like this one?
Shares might not collapse back to their prior penny stock status, but those dabbling in it today should bear in mind that potential downside risk may outweigh the opportunity for more gains.
BNGO Stock Remains Red Hot With Investors
Why are investors so excited about BioNano? One word: Saphyr. The Saphyr genome mapping system may become the next “must-have” platform for conducting genomic analysis.
Tools like this one could help medical researchers turn genomic information into future therapies and treatments.
With this in mind, it’s easy to see how massive the potential market could be for this system. And why investors have been willing to bid up BNGO stock.
There’s no denying the compelling story behind this stock. Yet, its future success is far from guaranteed. Add in additional concerns, such as the recent shareholder dilution, and it’s possible that this stock could surprise investors. And not in a good way.
Dilution Risk and BioNano
Much like other hot stocks out there, this company has capitalized on the heavy interest in its stock by raising capital via two separate equity offerings.
The first, on Jan. 12, raised $101.8 million via the sale of 33.37 million shares at $3.05 apiece. The second, on Jan. 25, raised $230 million. That deal, priced at $6 per share, increased the share count by around 38.33 million shares.
With these equity sales, the company has replenished its coffers. As it remains in the early stages, it needs outside capital infusions like this to sustain itself while it scales to profitability.
But the shareholder dilution that comes with this financing could affect how BNGO stock performs in the future. How? As the amount of outstanding stock increases, future upside is spread more thinly across shares.
What Analysts Have to Say About BNGO Stock
Where does Wall Street’s sell-side community think BioNano stock is headed? According to the consensus breakdown, shares get a Strong Buy consensus rating based on 3 Buy ratings and 1 Hold rating.
The average analyst price target on BNGO stock is $10.94 per share. This implies around 7% downside potential from today’s prices. This could indicate that while the company’s prospects are strong, its upside potential may right now be accurately priced into shares. (See BioNano Genomics stock analysis on TipRanks)
An Interesting Opportunity—But Don’t Chase It
Like with other high-risk stocks, things could go either way with BioNano. On one hand, the company could see tremendous success from its Saphyr genome mapping system. On the other, with high expectations already factored into its share price, any sort of disappointment could send it in the wrong direction.
Add in the heavy dilution from the company’s recent equity offerings, and prices of this “hot stock” could reverse, at least in the short-term.
So, what’s the best move with BNGO stock? If shares fall back to single digits, it may be a worthwhile opportunity, but don’t chase it at today’s prices.
Disclosure: Thomas Niel held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
