Over the course of the year so far, many stocks have emerged as possible coronavirus plays and one of the major gainers in that regard was the Sorrento Therapeutics (NASDAQ:SRNE) stock. The Sorrento stock from levels as low as $2 a share to $19 a share after the company claimed that it had a product that could inhibit the COVID 19 virus completely. However, doubts soon surfaced from several quarters and the stock started plummeting.
The claims from Sorrento resulted in a massive rally in the stock but soon after the announcement doubts were expressed about the product. One of the journalists at the Wall Street Journal stated the Sorrento had been too quick in making its claims with regards to the product.
Hence, it was no surprise as the stock plunged from its highs of $19 a share to $6 a share. The negative triggers have come thick and fast in recent days as well. The company provided an update with regards to its pipeline of products and that proved to be disappointing for shareholders as well.
In this regard, it is necessary to point out that the company’s COVID 19 product had probably been hyped a bit too strongly by Henry Ji, its Chief Executive Officer. However, despite the narrative of inhibiting the COVID 19 virus 100%, there have been no updates about a commercial launch. It is no surprise that the stock has tanked.
Sky High Valuation
Anyone who is looking to invest in a company must look closely at its valuation and in the case of Sorrento, it might appear somewhat inflated. At this point, Sorrento is valued at as much as $1.8 billion and that appears quite high considering the fact that the company has delivered positive earnings per share only once in a decade.
Last year, the company’s revenues stood at only $31 million and on top of that, Sorrento suffered losses of $300 million. In the second quarter this year, the company reported revenues of $9 million. That was higher than the $6.5 million generated in the year-ago period.
However, at the same time, investors should be noted that the company also suffered losses to the tune of $85 million in the second quarter. The Sorrento stock may have delivered handsome returns to some investors but at the end of the day, it is also important to know when to exit.
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