Zomedica Stock Forecast 2025: Will ZOM Rise or Fall More?

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May. 6 2021, Published 10:31 a.m. ET

Zomedica (ZOM) is one of the most popular penny stocks among retailer traders. It was pumped by the Reddit group WallStreetBets, which took the stock to as high as $2.91. However, it's back under $1 now. What’s the long-term forecast for ZOM stock? Will it rise or fall by 2025?

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There has been a bloodbath in all of the penny names, especially those that were pumped by WallStreetBets. While short squeezes that WallStreetBets triggered can impact the short-term price movement, in the medium to long term, stocks tend to trade according to their fundamental value.

Zomedica went on a capital raising spree

Like many other WallStreetBets pumped stocks, Zomedica went on a share selling spree. It raised almost $200 million from a bought deal with H.C. Wainwright. The issuance was way above what the company was originally planning.

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zom stock is down sharply from the peaks
Source: Koyfin

ZOM stock versus 200 and 50-day SMA

Also, the shares were issued at $1.90 per share, which is twice what ZOM currently trades at. The same pitchbook was adopted by many penny names this year and they raised a lot of cash by selling shares. Sundial Growers (SNDL) is a prime example. In most cases, the stocks trade below the issuance price.

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The cash helped to strengthen Zomedica's balance sheet. It had cash and cash equivalents of $62 million at the end of 2020. The company also converted the preferred shares to common shares ending the overhang from the instruments, which were entitled to 9 percent royalty of the sales.

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ZOM stock forecast 2025

ZOM stock’s forecast looks positive if we stretch it to 2025. In the past, I said that ZOM stock looks like a good long-term investment. My only concern was with the price. The stock is now trading below $0.90 and has a market capitalization of $825 million. While we don’t know the cash burn in the first quarter, the total cash should be around $250 million, which would mean an EV (enterprise value) of $575 million.

Currently, ZOM is commercializing its Truforma, which is a point-of-care device meant to be used by veterinary doctors. The platform would help detect thyroid and adrenal diseases in pets.

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In its filing, citing data from MarketsandMarkets, Zomedica said that the market opportunity for companion animal diagnostics is expected to rise from $1.7 billion in 2019 to $2.8 billion in 2024. The growing pet care market in the U.S. as well as globally is a good opportunity for Zomedica.

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Also, Truforma is a recurring revenue product and veterinarians would have to buy cartridges frequently based on their usage. While the forecasts provided by companies, especially penny names, should be taken with a pinch of salt, I find ZOM worth betting on for the long term.

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Will ZOM stock rise or fall?

In the short term, ZOM stock might still be susceptible to a fall. However, the stock could be getting near its bottom now. If you are a patient investor and can hold the stock for the long term, it could turn out to be a winner.

The company’s balance sheet looks strong and it has more cash than it needs. I wouldn't be surprised if it looks at acquisitions to make use of the cash. From a product standpoint, Truforma looks like a good bet.

If Zomedica can successfully commercialize Truforma, the stock could be a good buy. However, like all companies in the pre-revenue stage, it's still a high-risk bet. In markets, risk and return tend to go hand in hand.

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