When it comes to biotech stocks, they are known to be quite sensitive. The reason investors don’t prefer biotech stocks are because they are vulnerable to a meltdown once their binary event misfires. For example if a clinical trial doesn’t go according to plan, the stock will fall dramatically. If a drug isn’t approved by the FDA, the company won’t be able to do business at all and hence the investors will suffer. Although biotechnology has grown beyond the boundaries of health, from a business point of view it still hasn’t matured as compared to other sectors like energy, automobile, banking etc.
Solazyme (NASDAQ:SZYM) is a renewable oil producer that has failed its binary events and is now trading below the cash. But the executives of the company insist that Solazyme (NASDAQ:SZYM) is strong enough to do business and offer returns to the shareholders. The company was holding 250 million up till September but the recent misfires of the binary events left the company trading just below the market valuation. However there are definite reasons why Solazyme (NASDAQ:SZYM)’s stock is worth investing in.
The company expects to make 200 million in hard cash at the end of the year. That’s not all; the company has a burn rate of 30 to 35 million. It also has a healthy history when it comes to finances and the management assured that the cash balance will be twice or thrice next year at this time. So there are reasons why investors shouldn’t’ give up just as yet. Solazyme (NASDAQ:SZYM) must work upon how it plans to spend the money gained from the revenues.
The company is going to realize 70 million next year; in the last 12 months the company realized 185 million and to cover this gap Solazyme (NASDAQ:SZYM) will need at least 2 more years. Solazyme (NASDAQ:SZYM)’s market development will decide how successful the company is. The company should accumulate revenue from its profits next year. Solazyme (NASDAQ:SZYM) will also benefit if it enables large volumes of production.
It all comes down to grabbing opportunities and availing them. Solazyme (NASDAQ:SZYM) has to cover up for the losses and make some major cash in order to gain back the trust of the investors. Currently it looks as if Solazyme (NASDAQ:SZYM) will be using its current cash for reserves. Solazyme (NASDAQ:SZYM) needs positive earnings more than ever. Solazyme (NASDAQ:SZYM) needs to impress Wall Street and prove that there are customers out there looking forward to the product Solazyme (NASDAQ:SZYM) manufacturers and provides.
The task is definitely difficult but that’s what it has to do to regain the investor’s faith. It will be interesting to see Solazyme (NASDAQ:SZYM), being a biotech company, regaining business after a slump. Solazyme (NASDAQ:SZYM) will be thinking of devising a strategy to pull its resources and emphasize on making good healthy business and generating large profits.