July wasn't a good month for Zomedica (ZOM) and the stock fell by almost a quarter in the month. There was a sell-off in penny names especially the current and former “Reddit stocks.” While ZOM isn't very popular on Reddit group WallStreetBets, it was very popular on social media groups in the past. What’s the forecast for ZOM stock in August and will it rise or fall?
Like many other meme names, Zomedica also capitalized on the Reddit frenzy and went overboard with issuing new shares. As of March 31, the company had $276.6 million as cash and cash equivalents. To put that in perspective, the company has a market cap of only around $595 million. The company has an EV (enterprise value) of only around $320 million.
Truforma is in the commercial stage.
Zomedica is commercializing the Truforma product, which is a point-of-care device that's meant to be used by veterinary doctors. The platform would help detect thyroid and adrenal diseases in pets. The product would lower the time delay that pet owners have to go through for the test reports currently.
Looking at the growing market for animal diagnostics, which Zomedica expects to rise from $1.7 billion in 2019 to $2.8 billion in 2024, the company has a reasonably large market to address.
Why has ZOM stock fallen?
There are a few reasons behind the recent fall in ZOM stock. First, there has been a sell-off in all speculative names and Zomedica stock has fallen prey to that. Also, in July, the company provided a business update and talked about some delays in two initial assays for its Truforma product.
“While the change to our sales structure and the delay of fT4 and ACTH certainly were unexpected, we believe that these issues are being addressed effectively within and outside Zomedica,” the company said in its release. Now, it expects the fT4 assay to be available in late September or early October, while the ACTH is expected in about two months after fT4.
Zomedica's stock forecast in August
August would be a crucial month for Zomedica as the company is expected to release its second-quarter earnings. The company reported revenues of $14,124 in the first quarter and a net loss of $4 million. However, Truforma was only available for commercial sales for a few days during the quarter.
During the second-quarter earnings release, markets would get yet another chance to gauge Truforma's potential. It was available for sales throughout the quarter. According to the data from TIKR, analysts expect the company to post revenues of $1.1 million in the quarter, which is then expected to gradually rise to $1.9 million by the fourth quarter of 2021.
Truforma is a recurring revenue opportunity for Zomedica. After buying the initial equipment, veterinarians would also have to buy cartridges regularly, which would mean a recurring revenue stream and revenue visibility for Zomedica.
Will ZOM stock rise or fall?
During the earnings release, ZOM might also provide updates on its sales efforts. Management might provide more details about the progress on fT4 and ACTH assays. Looking at the recent crash in the stock, it might rise after the earnings release if management provides a rosy outlook.
ZOM is looking very bearish on the charts and trades below all of the key moving averages. However, it's getting near the oversold zone and has a 14-day RSI (relative strength index) of 35. RSI values below 30 signal oversold levels.