The coronavirus is in retreat, and central banks are ready to take action to curb inflation. In this regard, 2022 could be an interesting year for the global economy. In this difficult situation, many companies will continue to grow, others will lay low to wait out the turbulent times, and some companies are unlikely to be successful in the foreseeable future. That’s what we’re going to talk about today.
Inovio Pharmaceuticals (INO) is a biotechnology company that specializes in developing DNA-based vaccines for various viruses and infectious diseases. This company was one of the leaders in the search for a cure for the coronavirus in 2020, yet Inovio Pharmaceuticals has made little progress in the past two years. The company is now at pre-pandemic levels.
Despite modest successes in this area, the company has not given up hope of achieving results and entering the market with a vaccine against coronavirus. The issuer is currently conducting a phase III trial of this drug. The results on it should be published in the first half of 2022.
If this biotech company succeeds with the covid-19 vaccine, it is going to enter those markets where there is still a need for it. These are mainly Third World countries that Pfizer and Moderna have not reached.
Would you consider this company for investment? We wouldn’t, and here’s why. First, the company has to prove that its vaccine is effective and not inferior to already proven vaccines.
Second, Inovio Pharmaceuticals could have problems with the regulatory approval of the vaccine. The first vaccines received immediate approval because of the increased need. Now that the demand for the drug has been partially met, the regulator can thoroughly and carefully review it.
Third, the issuer will undoubtedly face strong competition in the market, no matter where in the world it is going to sell its drug.
Fourth, given current trends that coronavirus infection is waning, there may not be a need for a large number of vaccines at all, and the company may discontinue its research without even achieving meaningful results.
In addition to developing vaccines against the coronavirus, the company is engaged in research in other areas, but none of the other projects will come to market in 2022. Moreover, apart from development, the company has no drug that it has previously developed or released. The company is engaged only in research and does not make a profit.
Because of all these factors, the future of the company is uncertain. Investors do not like uncertainty, and it is unlikely that anyone will risk investing in the company’s shares shortly.
The Canadian company Cronos Group (CRON) develops medical cannabis products. Lately, it has fallen into the disfavor of investors, and here’s why. In the fall of 2021, the company told the regulator that it needed more time to calculate its profits and losses to file its third-quarter report.
Investors reacted negatively to this news, not giving the company a chance. The situation might have been different if the company had been successful in its field, but the problems with calculating its figures disappointed investors.
From the financial point of view, the company is doing average. In Q2 2021, the issuer’s revenues amounted to CAD 15.6 million, an increase of 58% over the same period in 2020. Moreover, the company’s gross loss increased many times over the year. Whereas in Q2 2020 the figure was around CAD 3 million, a year later it reached CAD 15.8 million.
The operating loss also rose to 60.2 million CAD, effectively double the loss recorded in 2020 for the same period. The net profit of the issuer amounted to 56.8 million CAD and was obtained from non-cash income, which is in no way connected with its business.
Even collaborations with other companies have not helped Cronos Group improve its performance. In 2018, tobacco giant Altria invested nearly CAD 2.4 billion in the company and gained a 45% stake. Altria’s capital and extensive international presence were expected to help the Cronos Group rise to a new level, but alas, this has not happened, and three years later, the Cronos Group is still unable to achieve a stable profit.
Moreover, the marijuana producer is lagging behind its competitors in many respects. Cannabis production has great potential, and perhaps the company has a future, but it is worth avoiding buying this paper at the moment.
GameStop (GME) stock was one of the first meme stocks during the pandemic. Thanks to private investors, the shares of the dying company soared by several hundred dollars in a matter of days. However, this growth did not help the company much, as it continued to suffer losses, failing to justify investors’ confidence, and in a few months of 2021, this paper fell by 15%. What other things would discourage investors from buying this company’s shares?
GameStop is trying its best to change the situation in its favor. First of all, the company is changing its business model, adapting to the new market realities. The goal is to become a multi-channel retailer that focuses on digital and digital sales.
The company will have to abandon many of its stores and move to digital sales, as gamers tend not to buy their games in stores anymore, making their purchases online. The issuer closed hundreds of its branches in 2020 and early 2021. And by mid-2021, its network included 4,600 stores, up from 5,500 at the end of 2019.
To get to the right level faster, the company made Chewy cofounder Ryan Cohen head of the GameStop board of directors. The company also began focusing on collectibles and consumer electronics to allow the issuer to expand its product line.
Unfortunately, all of the before-mentioned actions did not significantly increase the value of GameStop stock. The company still has a chance to compete in the sale of games, but as for the sales of consumer electronics, it is unlikely to succeed because the competition is too great.
So far, the company has made some money because of the stock price spike in early 2021 and recent changes. It has helped it improve its financial situation. For the three quarters of 2021, the issuer’s revenue amounted to $3.8 billion, showing a 27% growth compared to the nine months of 2020. The company’s loss came in at $234 million.
Nevertheless, this came after revenues fell 45% between 2017 and 2020. The lack of long-term forecasts from the company is not in favor of buying the paper either, which suggests that the future looks uncertain for GameStop management. Independent experts predict that Q4 revenue is expected to grow by 4% and decline by 1% in 2022.
The company is undoubtedly trying, but will a change in leadership and improved online sales be enough to keep the stock steadily going up? Not likely! So far, the company’s actions only help it to stay afloat. And even the attractive price/sales ratio (P/S) of 1.2, which pales in the face of sluggish financial statistics and lack of competitive advantages, does not contribute to this.