The last time I weighed in on Zomedica (NYSE:ZOM), I said, “It’s very easy to get caught up in the excitement of a potential boom. But don’t jump the gun. Wait to see how the product does with veterinarians first before investing gobs of money. Should the product do well with that group, then yes, it could double, even triple with patience.”
That was on March 31, as the ZOM stock traded at a high of $1.73.
Shortly after, it hit a March high of $2.72. But then, it decided to roll over and play dead at 89 cents. That wasn’t really a surprise. In fact, it was an expected “sell the news” reaction. Once it released the product, the catalyst faded, and down came the stock.
Would I use the latest pullback to buy more? Nope, not yet.
Right now, as noted by Investorplace contributor Thomas Neil, “There’s a next-to-zero chance it can quickly grab the level of sales needed to justify its current market capitalization.”
Unless ZOM can produce respectable sales, there’s not much to get excited about here.
Zomedica Stock Could Fall Even More
Sure, “Trufoma could be a game-changer for the industry. Veterinarians can use the Truforma platform to identify any thyroid or adrenal problems in your dog or cat. Better, instead of shipping your pooch’s blood tests to an outside lab, your vet’s office can use the platform to run all the necessary tests right then and there,” as I also noted on March 31.
However, we won’t really know how it’s doing until the end of the second quarter.
Considering its first sale came in near the end of the first quarter, I’m not expecting anything earth-shattering. What I will be looking forward to is guidance. If impressive, perhaps the company’s current market cap of $823 million will make sense.
Right now, all we know is that as of Dec. 31, 2020, the company produced no revenue. It also posted $16.9 million net loss, as compared to a loss of $19.8 million year over year.
Nothing worth writing home about.
While I Wouldn’t Touch the Stock Just Yet, There is Hope
“The TRUFORMA system expansion would represent the first non-infectious panel fully available at the point of care and able to assess the function of the pancreas, proximal small intestine, and distal small intestine to identify the source of the distress,” as noted by a contributor on Seeking Alpha.
In addition, analysts at Research and Markets noticed that:
“In 2019, the molecular diagnostic segment generated revenue of around USD 514.73 million. Globally, the use of molecular diagnostics has been increasing for the detection of veterinary pathogens. It involves the detection of pathogens directly by checking the presence of RNA or DNA in the host or indirectly by prior amplification of the genome of the infectious agent.”
The Bottom Line on the Zomedica Stock
Right now, I’d stay away from the ZOM stock.
After exploding from about 20 cents to $2.72 in months, a sell the news reaction sent it back under $1. From here, I’m not expecting to see much improvement until we see first quarter guidance, and second quarter sales numbers.
If Truforma truly is a game-changer, there’s hope the company could grab part of a potential $10.5 billion animal diagnostics market. Right now, with no revenue, and a hefty net loss, there’s not much to get excited about with the ZOM stock yet.
Let’s first see company guidance, and go from there, though.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.