Senseonics (NYSEAMERICAN:SENS) stock has surged over the past six months.
SENS used to trade deep in penny stock territory. Shares were below 50 cents through most of 2020.
However, Senseonics rocketed to as high as $6 per share during the huge Reddit short squeeze phenomenon back in January.
Now, SENS stock has settled back down to around $2 a share. This could offer a better buying opportunity for traders that missed the initial run-up.
Before we take a look at whether Senseonics worth getting involved in at all let’s back up and take a look at how Senseonics hopes to start making money.
Diabetes Care and SENS Stock
Senseonics focuses on developing products to help with diabetes care. Its lead product, Eversense, provides continuous glucose monitoring (CGM). It is novel in that it can be implanted and then provide data for up to six months. The company describes it as the “world’s first long-term CGM,” touting the device’s accuracy, longevity and bio-analytics.
Getting rid of invasive glucose monitoring is indeed a huge leap forward. That said, there are rivals going after the CGM space as well. Senseonics is hardly the only firm involved.
You can find plenty of small medical device companies out there. A lot of companies come up with innovative products but struggle to get them to market. Distribution, not technology, is often the sticking point. That was one of the key reasons why Senseonics stock traded at such a low level as well. Investors worry how Senseonics can make Eversense a commercial success.
However, the company had a huge breakthrough on this front. Instead of trying to build its own marketing outfit, Senseonics made an important partnership with Ascensia Diabetes Care.
Ascensia is the offshoot of Bayer’s diabetes business and thus is a well-known global operation. Ascensia invested money in Senseonics and is distributing the Eversense line of products in many locales, particularly in Europe.
Investors panned Senseonic’s recent quarterly results, as earnings and revenues didn’t quite live up to Senseonics’ recent stock price gains. However, Ascensia was rebooting marketing efforts for Eversense in the United States.
According to the company’s latest conference call, Ascensia has relaunched Eversense in the U.S. recently and hired several dozen marketing employees to get product sales rolling there.
Risks to Senseonics
Eversense is still in the early stages of commercialization. The company anticipates $12 million to $15 million in sales this year. That’s up dramatically from 2020 levels but is still rather modest in the grand scheme of things.
Another potential concern is competition. Ascensia wouldn’t have invested so much time and financial capital into Senseonics if it didn’t think the platform was viable. However, Senseonics isn’t the only game in town. Other well-funded competitors like Abbott (NYSE:ABT) and Dexcom (NASDAQ:DXCM) are active in continuous glucose monitoring as well.
Having the backing of a huge player like Ascensia gets Senseonics onto a level playing field. It doesn’t guarantee success, but it does give the company a fighting chance.
Senseonics also has a large cash balance; it held $178.6 million as of last quarter. This gives time for Ascensia to ramp up sales, and also for Senseonics to further its research and development to keep Eversense up to speed with rivals.
SENS Stock Verdict
It’d be easy to dismiss SENS stock. It’s been in business an awfully long time without much to show for it before now.
Senseonics rallied with a lot of other low-quality meme stocks back in January. There are reasons for caution are here, and this is still a high-risk investment. Our Josh Enomoto makes a solid case for being wary of SENS stock and it’s worth reading before investing any capital.
That said, Senseonics is up on real, tangible, positive news. This isn’t just messageboard hype. Ascensia is a quality partner. With it in charge of marketing, there’s a chance that Senseonics’ products will finally reach the inflection point.
It will take a few more quarters of strong operating results for investors to really buy into the story. But, at this point, SENS stock is definitely one to have on the watchlist.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.