On Monday July 13th, Inovio Pharmaceuticals (NASDAQ:INO) was booming. Shares were up more than 22% at one point, as INO stock was making another run at a breakout attempt.
Source: Ascannio / Shutterstock.com
For technical traders, the size of the move might have been surprising, but the rally certainly was not. However, Monday had more up its sleeve than investors had bargained for.
Breadth wasn’t great in the morning despite strong gains in the indices, while the CBOE Volatility Index was notably higher on the day.
These are things one tries to take note of, however hard it may be when stocks like Inovio are up big, alongside names like Tesla (NASDAQ:TSLA), Wynn Resorts (NASDAQ:WYNN), Netflix (NASDAQ:NFLX) and others.
INO stock still powered higher by 9.6% on the day. But can the stock continue higher or will selling pressure force this name lower?
Trading INO Stock
Source: Chart courtesy of StockCharts.com
The daily chart above shows just how powerful the move has been in INO stock. I’m not just talking about Monday’s 9.6% rally — which barely stands out after this huge run. Instead, I’m talking about the long-lasting rally we’ve seen all year.
Shares were trading slowly but surely in the right direction in January and February. However, it wasn’t until March that this name started to show its explosively bullish behavior.
The stock ran from a low near $4 to a high of almost $20 in just a few days. While INO stock did cool off a bit after that, it has continued to maintain above the 50-day moving average, while slowly grinding higher.
After three prior attempts, shares finally broke out over $16 resistance last month, ultimately running to $34. More recently, Inovio was struggling with the $24 to $25 level after pulling back. That’s where we saw Monday’s big breakout trigger from, as shares burst over this resistance zone and ran to the 161.8% extension at $28.15. So what now?
Bulls do not want to see this name break back below prior resistance. However, they must accept that INO stock is a volatile name that can make large moves. If shares close below the 20-day moving average — currently at $21.65 — it could put a retest of prior resistance in play at $16.
This would be a solid buying opportunity, in my opinion, provided this area held as support.
If INO stock maintains above the $24 to $25 area, look to see if it can take out Monday’s high at $28.54. Above puts $32 to $34 in play. Over $34 — the two-times range extension — technically puts the 261.8% in play, at $42.38.
Bottom Line on Inovio
Why exactly is the stock price booming higher? Because growth estimates for the company continue to as well.
Analysts predict 500% revenue growth in 2020, although that tallies in at just $24.7 million. Consensus expectations call for 42% earnings growth this year, but for a loss of 70 cents per share. The current rally has Inovio carrying a $4 billion market cap.
These estimates do not seem to back up the valuation nor the stock price appreciation we have seen thus far. However, estimates for 2021 do.
Current estimates call for revenue growth of 1,355% — not a typo — to $360 million. Earnings are forecast to nearly quadruple, with estimates calling for a swing to profitability at $1.28 per share.
In that situation, we’re looking at a stock that’s trading at less than 20 times next year’s earnings, while growing exponentially. Of course, that growth is not sustainable and admittedly, this is more of a play on the novel coronavirus.
Still, INO stock is a reasonable speculative play given the potential growth here and the technicals. Of course, it helps that its balance sheet is okay. Inovio has $270 million in cash and short-term investments vs. current liabilities of $32.3 million and long-term debt of $76.5 million.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.