When I got the email to analyze Zomedica (NYSEAMERICAN:ZOM) — again? — I was a bit disappointed. I just covered ZOM stock a month ago and if I may toot my own horn for just this once, I felt that I gave the veterinary play a fairly comprehensive go, assessing both the bull and bear arguments.
Ultimately, I suggested the idea to readers that they should wait. Frankly, I didn’t like the economic read and I still have many questions about our so-called recovery. Near the end of my piece, I wrote that “economic pain means that we’re going to skimp out on pet health care — I mean, we can barely afford human healthcare!”
Okay, okay, yes, the pet care market has been booming for years. And sure enough, it boomed last year as well despite the impact of the novel coronavirus. Evidence suggests that it was because of the pandemic that the pet care industry blossomed. After all, being quarantined away from our human companions, we collectively turned to our four-legged ones.
More importantly, at least from my end, I was right to be concerned. Between my publication date to the time of writing (March 10), ZOM stock dropped 23%. That’s a ton of volatility over the span of just a few weeks.
But that also poses a problem. After such a sharp decline, should investors continue to avoid (or for the gutsy ones, short) ZOM stock or go the other way?
As someone who has no skin in the game other than reputational concerns, I’m agnostic toward it. If the conditions warrant it, I’ll be more than happy to talk up Zomedica, so to speak.
Lots of Love for ZOM Stock But Should You Join?
From a cursory look at my InvestorPlace colleagues’ opinions, it seems more people are willing to entertain the bullish argument. For instance, Will Ashworth noted last month that for the right investor, ZOM stock could be a compelling discount.
The business largely depends on Truforma, a diagnostic platform for dogs and cats that can rapidly detect thyroid and adrenal diseases. As Ashworth points out, “That gives veterinarians a big head start in coming up with a treatment plan for your companion animal. Having owned several cats that suffered from thyroid-related issues, any time savings made in the detection process is beneficial.”
Our own Chris Tyler offered a similar take. While I expressed concerns about economic pressures on pet-owning households, Tyler articulated that “more costly off-site lab results get the boot” from the Truforma platform. And with a potential increase in the size of the pet diagnostics market, this suggests a “significant sales boon for Zomedica.”
Naturally, this will be very good for ZOM stock. Another factor that I didn’t mention in my prior write-up was that not only do millennials love their pets, they spend more on dog care than baby boomers, according to People.com. Since millennials are the relevant generation — and statistically, they represent the largest demographic in the U.S. workforce — this puts Zomedia on the proper footing.
If I may be cynical and a tad bit controversial — because you know, this is me we’re talking about — in a downturn, companies are looking to let go of their older workers first. Personally, I think this is a stupid idea because getting rid of your older workers means you’ll be left with a group of directionless, self-absorbed imbeciles.
But I understand why companies do it. Older workers get paid more and carry more associated liabilities such as increased healthcare costs. If things go ugly in the economy, you want a company that’s exposed to millennials, not to boomers.
Is This the Discount You’re Looking for?
All that said, is now the time to strike on ZOM stock? I’m not opposed to a careful, calculated nibble at these prices. After all, Zomedica has a strong social media following and isn’t that the most important catalyst that there is these days?
Still, I’m fundamentally hesitant. Thus, if you do speculate on ZOM, I’d keep the powder keg dry for further discounts. I think Ashworth said it best: “It’s speculative, to be sure, but no more speculative than a lot of the crap investors have been betting on in recent weeks.”
Now, when I have a venture that I want to spend my money on, crap is not a word I necessarily want to hear. Sure, I know a thing or two about the subject but I try not to steer my portfolio toward the brown stuff too many times.
So, bottom bottom line — if you have a dollar figure of speculation in mind regarding ZOM stock, put 10% of it down now and wait with the other 90% for a better read.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.