Call it a hunch if you want (because that's all it is), but I've got a feeling Sequenom, Inc. (NASDAQ:SQNM) is at the early stages of what's going to be a big - and trade worthy - rally. SQNM shares have dropped all the key hints I need to see to say there's more "up" than "down" in their future.
Yes, this is the same Sequenom that was all the rage with peers like Illumina Inc. (NASDAQ:ILMN) and Complete Genomics, Inc. (NASDAQ:GNOM) back in 2010 and 2011, when DNA analysis became real, and accessible, to companies as well individuals. SQNM also pulled back in late-2011 and 2012 along with GNOM and ILMN, as the market began to realize that even though the technology is impressive, a lot of companies were doing it, it doesn't exactly solve a problem [it only identifies them], and these companies still have to do all the marketing, selling, and management that business have to do in order to thrive.
In other words, the buzz wore off, and Complete Genomics, Illumina, Sequenom, and most other names in the gene sequencing business began to drift lower again.
As is so often the case within the stock market though, the second wind for SQNM may be the one that investors want to tap into, as it could be the one that lasts.
If nothing else, Sequenom, Inc. has a lot more PR fodder working in its favor now that it didn't have just a few months ago. For one, it's got plenty of cash to work with after raising $130 million last year via the sale of convertible debt. More recently it's gotten some new analytical coverage. And, it recently announced a marketing and licensing deal with French company Laboratoire Cerba. Oh, and revenue's on the rise too, every year from 2009's $39 million to last year's $90 million. That growth trend is still in place too, and projected into the future. Analysts are looking for a top line of nearly $200 million this year, and $275 million next year. That's a big leap, but given the trend already in place, it's not out of reach.
What's less appreciated about SQNM is that for the first time in, well, ever, last quarter's strong revenue increase made a dent in the company's habitual loss. Could we be at the proverbial critical mass where sales start to outpace expenses? The pros think so, looking for a loss of $0.81 per share this year versus a loss of $1.03 per share last year. 2014's estimate is a loss of $0.35 per share. It's still a loss, but as veteran small cap traders can attest, progress is better than actual profits when it comes to spurring a stock higher.
Either way, the chart says the market is turning bullish again on Sequenom, Inc., and that may be enough to step in. Since the low of mid-2012, we've seen higher highs and higher lows. It's been enough to make the key 200-day moving average line (green) slope upward again, which SQNM just crossed above this week.
Budding momentum from the stock? A business model that's viable? Profits in the foreseeable future? Investors could certainly do a lot worse.
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