man doing a sample test in the laboratory

You’d be forgiven for not knowing much about Oxford Nanopore (LSE:ONT) stock. It was formed back in 2006, being a spin off project from the University of Oxford. Yet since then, the business has grown to currently have 600 employees and several offices worldwide. That in itself is impressive, but not enough to warrant unusual attention. What is worth attention is the fact that the IPO happened last week, and the share price is up 40% since then.

The story behind Oxford Nanopore stock

The main reason for the jump in Oxford Nanopore stock is institutional investors jumped in. The stock is open for unconditional trading from 5th October, for retail investors like us. We’d imagine the stock has further legs to move higher in the short-term, as retail investors jump on this move higher. 

The interest is high partly because the company has a wide range of potential revenue streams. These range from healthcare to security, from education to agriculture. The range of commercial uses is pinned down on the technology that the company has developed. It has DNA/RNA sequencing technology that allows it to identify organisms and other elements of the organism. 

As such, it can be used to identify something and tell us whether it is harmful or not. Think of the benefits of this for crops, or farmed animals. Another recent use has been with Covid-19. In fact, the business won £144m worth of UK Government contracts last year specifically for this purpose.

Getting things commercialized 

The trick will be if Oxford Nanopore can commercialize all (or even some) of these uses. At the moment, the company is yet to make a profit. Yet this isn’t unusual for tech firms in this area. It has high research and development costs, and low revenues until the uses are ready for industry. 

This is the largest risk we see for buying Oxford Nanopore stock going forward. If this turns out to be another over inflated tech stock without the ability to generate revenue, the share price will likely flop. 

Yet the jump since the IPO shows that investors don’t think this to be the case. Given the lack of financial information in the public domain, it’s hard to pin an accurate valuation on the business. Yet we can note that the last funding round back in May saw a valuation of £2.4bn attached. 

With a closing price yesterday of 596p, this gives Oxford Nanopore stock a market cap of £4.76bn. This is quite rich, and a large increase in just a few months. We feel that this does make the stock look expensive, but doesn’t mean overpriced. 

Overall, with strong momentum behind the company, we would be tactical buyers of the stock this week and would look to ride the wave higher. However, this is a high risk investment that wouldn’t be suitable for everyone.

2 thoughts on “Oxford Nanopore – the best stock you’ve never heard of”
  1. […] been keeping a close eye on an emerging UK biotech stock, Oxford Nanopore (LSE:ONT), which had a strong IPO this year and has outperformed the market since the listing. We expect the company to go from strength to […]

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