With the stock falling 37.8% over the last 12 months, shareholders of Bionano Genomics (BNGO -2.78%) are bound to be getting a bit frustrated. The genome mapping device manufacturer's fortunes haven't done anything but improve in recent memory, but the market's reception to its successes continues to be fairly cool.
Yet Wall Street analysts are, on average, quite bullish about the stock, and they even anticipate it to multiply in value within a year's time. So are Bionano's shares yet another casualty of 2022's bear market, or are they going to soar in 2023 and beyond?
Here's why analysts are expecting a home run
At the moment, Bionano's stock currently has an average analyst rating of 1.4 out of 5, indicating that it's rated as a "strong buy" rather than as a hold (a rating of around 3) or a sell (a rating of greater than 3). There are a few reasons why the pros are so positive, starting with the fact that the company is competing in a niche where there aren't any other players.
In case you're not familiar, Bionano's specialty is in optical genome mapping, where its analyzer device called the Saphyr is the only stand-alone product capable of detecting and quantifying genomic structural variations of all sizes. If you don't know what genomic structural variations are, just think of them as large insertions, deletions, inversions, or transpositions of DNA that tend to cause highly problematic versions of conditions like cancers and neurodevelopmental disorders. Though there is a medley of older techniques that can do the same jobs as the Saphyr when used in series with each other, none of them are capable of doing the same range of mapping tasks alone. Plus, using the alternative methods typically requires laboratory staff to spend many long hours working manually, which tends to be expensive, and, in my firsthand experience, the opposite of fun.
So a lack of competitors and simplifying convoluted workflows constitute two solid reasons for optimism about Bionano and its product, and its excellent performance in the past year is another plus. For 2023, on average, analysts are calling for just over $44.6 million in sales. That's a jump of more than 59.2% over management's preliminary estimate of revenue up to $28 million in 2022. And given that the top line for 2022 is expected to be as much as 56% higher than 2021's total, it looks like Bionano's rapid growth is set to continue or even slightly accelerate.
In terms of a price target for its stock, Wall Street analysts expect the impact of the company's ongoing growth to be massive. Compared to its current price near $1.28 per share, analysts' average price target is $6.10, implying upside of around 376.5% within a year. That means people who invest today could be sitting pretty in close to no time flat, assuming that the business can meet the market's expectations.
The analysts could still be wrong
Analysts aren't always right, and a lot of things could get in the way of their price target becoming a reality. As an unprofitable growth stock, Bionano is likely to continue suffering from the detrimental impact of the Federal Reserve's mission to tame inflation, which requires hiking the interest rate that businesses pay when they borrow money. Bionano has $180.1 million in cash and approximately $10.3 million in debt, and with total expenses of only $39.3 million in Q3 of 2022, it shouldn't need to borrow money for around a year or longer. When it borrows, it might do so at an acceptable rate, as it has little debt and a long runway toward further growth -- and likely profitability, too.
Nonetheless, there's a good chance that the stock will continue to fall if interest rates keep rising. Another risk is that the Saphyr's traction in the biomedical community will fail to keep consolidating, perhaps as a result of a new entrant to the market developing a lower-friction technique for mapping structural variations in genomes. For the moment, however, that risk is low, and potential competitors remain on the sidelines.
So, should you follow Wall Street's advice and buy shares of Bionano like there's no tomorrow? Probably not, because having a stellar 2022 in terms of executing its business expansion plan didn't lead to shareholders getting rich thanks to the detrimental impact of the bear market, which might well continue through 2023. But if you're thinking about starting a conservatively sized position to get some exposure to its growth, it wouldn't hurt to pick up a few shares.
