Are you familiar with Ocugen (NASDAQ:OCGN), the penny stock that took a massive plunge in 2019? OCGN stock closed near $14 on Sept. 26. Three sessions later, it closed at $2.19.
The stock has been on a painful descent since then, most recently closing at 25 cents. Currently, Ocugen sports a 52-week range of 17 cents to $21.60. That’s quite the range, but not unheard of when it comes to small biotech stocks.
All of this action comes after its deal with Histogenic. Ocugen is the result of an all-stock deal, where 90% of the combined entity went to shareholders of the privately held Ocugen. The combined entity continued business under the Ocugen name, which simply adds another layer into this interesting arrangement.
Penny for Your Thoughts
Here’s the deal. I’m generally optimistic about the reopening of the world. We’re seeing more people flying, going out to eat and returning to normalcy.
While there are fears about a second wave, we have to be cognizant of a few things. First, there’s far more testing than there was a few months ago, while the intention of a lockdown was to flatten the curve, not eliminate Covid-19. For that, we’ll need a vaccine or treatment.
But in any regard, I’m optimistic on humanity pushing through this situation and thus, have been optimistic on stocks. How does any of this pertain to OCGN stock? I’m glad you asked.
As the economy recovers, there’s a bevy of businesses that are doing well. Stocks like Shopify (NYSE:SHOP), Amazon (NASDAQ:AMZN) and even the Invesco QQQ ETF (NASDAQ:QQQ) have all powered back to life.
But not OCGN stock. Shares are more than 63% off the 2020 highs and are down almost 20% over the past month. In fact, based on the 52-week range provided above, shares are less than a dime above the annual low.
I don’t have any desire to buy into a stock that is performing this badly. That’s particularly true when there are a number of well-run entities doing much better, as is the overall market.
Penny stocks are tough. Because they are cheap, some investors find them attractive. This situation is intensified if the investor has had success with a few penny stocks in the past. And what do I know — maybe OCGN stock will trade up to a buck and be a four-bagger.
But I wouldn’t bank on it, because the fundamentals simply aren’t there.
Bottom Line on OCGN Stock
There’s a major difference between speculating and investing.
For the latter, we look at things like total addressable market, margins, cash flow and sustainability. We also look at technical trends and momentum. All of these measures combine to give us an idea of what the business is like and whether it’s something we want to invest in.
That’s what we do with AMZN and SHOP stocks, or even with the QQQ exchange-traded fund, which has several reasons to consider ownership. For Ocugen though, there is none of that.
The company doesn’t generate revenue — at all. Therefore, any operating cost puts its net income in the red and creates a drag on cash. There are no margins and the stock has no momentum. Well, at least no bullish momentum.
But it does have a chance.
It’s going after a gene therapy solution for retinal diseases. The promise of a solution makes for a huge opportunity — if the company can nail the results. On June 1 though, Ocugen discontinued its Phase 3 testing.
The odds of this one panning out are low, but that’s why it’s a speculation play. It’s not one for me, as I prefer investing in sound businesses over binary setups. But just know your risk.
Matthew McCall left Wall Street to actually help investors — by getting them into the world’s biggest, most revolutionary trends BEFORE anyone else. The power of being “first” gave Matt’s readers the chance to bank +2,438% in Stamps.com (STMP), +1,523% in Ulta Beauty (ULTA) and +1,044% in Tesla (TSLA), just to name a few. Click here to see what Matt has up his sleeve now. Matt does not directly own the aforementioned securities.