Why Is Zomedica Rising, and Is It Still a Buy?

Zomedica (ZOM) stock rose almost 14 percent on Aug. 25 and was up in premarket trading on Aug. 26. The stock has been following an uptrend as meme stocks rally on speculations of more short squeezes. Why is ZOM rising, and what’s the forecast for the stock in 2021?

There's been a splendid rally in meme stocks over the last few days, including the original memes, GameStop (GME) and AMC Entertainment (AMC). Meme stocks' rise in August was a welcome break for investors after ZOM and other penny stocks tumbled in July. Now, unlike some other penny names, ZOM looks like a good buy.

Zomedica is producing and commercializing Truforma, a point-of-care device for animal diagnostics. The device can help veterinarians and pet owners by reducing the wait time for the test results. Truforma offers Zomedica a recurring revenue opportunity, as users would have to buy new cartridges to reuse the device.

There hasn’t been any company-specific news that would be driving ZOM stock. The most recent update from the company was on Aug. 11, when it released its second-quarter earnings. If anything, the earnings were disappointing. While the company began commercial sales of Truforma in Mar. 2021, sales in the June quarter came in at a mere $15,693, almost flat with the previous quarter's.

The tepid sales growth left the market disappointed and ZOM stock fell after the earnings release. Zomedica said that its revenue was lower in the quarter due to delays by its partner in developing fT4 and ACTH assays. It said that ft4 assays would be available by the fall, and ACTH by the end of 2021.

“The Company believes that market acceptance of TRUFORMA® has been adversely impacted by delays in the development of our fT4 and ACTH assays by our development partner. We expect that market adoption of TRUFORMA® will be challenging until our fT4 and ACTH assays are available for commercial release,” said Zomedica in its release.

According to data from Fintel, on Aug. 25, ZOM had a total FINRA short volume of 52.5 million shares on Aug. 25—up over sixfold from the previous day. However, ZOM's FINRA short volume as a percentage of total volumes was 55 percent, only slightly higher than the previous day's 53 percent.

The forecast for ZOM stock looks positive, given the animal diagnostic market's growth. If Zomedica can successfully commercialize Truforma and its sales pick up after the launch of new assays, the stock could be a multibagger.

Penny stocks, especially those trading below $1 can be volatile and risky. But considering Truforma's potential, ZOM could be a penny stock worth betting on.