Seemingly out of nowhere, a tiny vet-med stock by the name of Zomedica (NYSEMKT:ZOM) has turned into one of Wall Street’s biggest winners over the past few months. Since early November, ZOM stock has risen by more than 1,000%.
It was a huge rally in an underfollowed name that no one saw coming. Well, almost no one.
In InvestorPlace’s financial newsletter The Daily 10X Stock Report — which is aimed at delivering to your inbox, every single day, a stock pick that could rise by at least 10X — I alerted subscribers in July that ZOM stock was an explosive play on the “we’re starting to treat pets like humans” megatrend.
Indeed, thanks to its breakthrough pet diagnostics platform TRUFORMA, I called Zomedica the “most exciting biotech company in the market today.”
At the time, Zomedica’s stock price was around 20 cents. Zomedica’s price today is closing in on $1 — meaning Daily 10X subs are up almost 400% on ZOM stock in about six months.
In other words, no one saw this massive breakout in Zomedica coming except for The Daily 10X subscribers … and in seeing the big rally come before anyone else, those subs have made 5X their money.
Believe it or not, being alerted to huge winners before they stage breakout rallies has become par for the course for The Daily 10X subs. Those subscribers were told about Chinese premium EV maker NIO (NYSE:NIO), hydrogen industry leader Plug Power (NASDAQ:PLUG), and psychedelic-inspired medicine pioneer MindMed (OTCMKTS:MMEDF) before they had their big breakouts. The Daily 10X subs have scored 1,000% gains in each of those names.
Subs were also told about QuantumScape (NASDAQ:QS), Luminar (NASDAQ:LAZR), JinkoSolar (NYSE:JKS), Blink Charging (NASDAQ:BLNK), Digital Turbine (NASDAQ:APPS), and many, many others before those stocks staged huge breakout rallies, and have scored 100%-plus gains in all those names, too (to read more about the newsletter, click here).
But back to ZOM stock, I think this big breakout could actually be just the beginning of a much bigger, longer uptrend wherein shares could soar above $3.
Here’s a deeper look.
Pets are Becoming Humans
To understand the big picture bull thesis on ZOM stock, we must first take a step back and look at the context of this company. That context, of course, is that pets are becoming humans, and as such, we are spending more and more money on all-things pet-care-related.
I’m a single child. Yet, growing up, my pops always called me “number two.”
Who beat me out? Rudy. Our dog. Our 30-pound, too-cute-for-this-world, eats-everything-in-sight pug.
Of course, the “number two” thing was a joke. But behind every joke, there’s a hint of truth. Rudy was part of the family. And we treated him like it. He ate what we ate. He slept where we slept. He traveled with us. The whole nine yards.
As it turns, Rudy was no exception in the U.S. Pets across America are increasingly becoming a part of the family. They are starter children for young couples. They are replacement children for empty nesters. They are best friends for single children (I would know).
The humanization of pets is a quickly emerging trend, which has led to U.S. pet-care spend rising by more than 100% since 2010. Companies who have capitalized on this “pets are humans” megatrend have been big winners.
Look no further than vet med-tech companies Zoetis (NYSE:ZTS) and Idexx (NASDAQ:IDXX), or pet product e-commerce company Chewy (NYSE:CHWY). CHWY stock is up 234% over the past year. ZTS stock is up 270% over the past five years. IDXX stock is up 1,390% over the past ten years.
ZOM stock is attractively positioned to follow in the footsteps of CHWY stock, ZTS stock and IDXX stock, and score huge returns on the back of the pet humanization megatrend.
A Breakthrough Platform in the Inefficient Vet Diagnostics Market
Zomedica is a $500 million, pre-revenue vet-med company focused on developing novel diagnostics and innovative therapeutics for companion animals, like cats and dogs.
Its first major product, a unique diagnostics tech platform called TRUFORMA, is on the cusp of commercialization in the U.S. in 2021. Once it does debut, TRUFORMA will begin a multi-year, significant disruption of the $2.8 billion and growing domestic veterinary diagnostics market.
The logic is simple: TRUFORMA takes what is a complex, timely and costly incumbent vet diagnostics process, and makes it simple, cheap and quick.
Vet diagnostics are not easy. If you have a pet, you know what I’m talking about. You take your cat or dog in for an exam. The vet takes a stool sample or a blood sample. They send that out to a remote, off-site referencing lab. That lab runs tests. A few days and hundreds of dollars later, you get a test result.
Compare that to the TRUFORMA process:
- Obtain a sample from the pet in-clinic.
- Seconds later, add that sample to a Zomedica-provided cartridge with preloaded reagents.
- Insert that cartridge into an on-site TRUFORMA machine, which is no bigger than a printer.
- Let the machine use a breakthrough, novel process called Bulk Acoustic Wave (or BAW) Sensoring to measure small changes in frequency in response to binding events.
- Less than 20 minutes later, get high-quality diagnostics test results, for just a few bucks.
Sound like a way better process that saves a lot of time and money? It is. But does it actually work? No question about it. The TRUFORMA’s test results match lab referencing test results with a 95% to 99% correlation, depending on the type of test performed.
To that extent, the writing is on the wall here. Zomedica’s TRUFORMA platform represents the cost- and time-efficient future of veterinary diagnostics.
Of course, that’s exceptionally bullish for ZOM stock.
Pathway to $3 for Zomedica Stock
My modeling suggests that Zomedica stock has a clear pathway to $3-plus prices in the foreseeable future.
Here’s the mental framework.
When it launches later this year, the TRUFROMA platform will be used exclusively for the diagnosis of thyroid disease in dogs and cats, and adrenal disease in dogs. But TRUFORMA’s proprietary BAW Sensoring tech is scalable and repeatable — so the platform will inevitably, over the next few years, add things like renal and diabetes testing, too, without much additional cost.
In other words, TRUFORMA has the potential to turn into an all-in-one, in-clinic diagnostic testing platform that takes a multi-day, expensive testing process, and shrinks it into a 20-minute, super cheap testing process.
Accordingly, the TRUFORMA platform, which is protected by 70 patents and several more exclusive rights, could one day become ubiquitous across the 35,000 U.S. vet clinics already running in-clinic chemistry.
The U.S. veterinary diagnostics market measured $2.8 billion in 2018. It’s consistently growing at 10% per year. By 2025, then, the market will measure north of $5 billion. Let’s say TRUFORMA deeply penetrates the market, and gives Zomedica 5% share of that $5-plus billion market — implying $250-plus million in revenues.
Peer vet-med stocks Idexx and Zoetis have historically traded around 7X sales. A 7X sales multiple on $250-plus million in revenues implies a potential future market cap for Zomedica of $1.75 billion — which, on today’s share count, implies a future price target for ZOM stock of over $3.
Bottom Line on ZOM Stock
The big breakout in ZOM stock may be just beginning. This company is on the cusp of commercializing a breakthrough technology platform that could meaningfully disrupt the $2.8 billion and rapidly growing vet diagnostics market.
Yet, Zomedica is worth just $500 million today.
The implication, of course, is that ZOM stock has a long runway ahead before it’s maxed out.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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