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Progenity Stock: Wall Street Forecasts 45% Upside

Biotech company Progenity’s stock has been falling apart since last year’s IPO. But following a share price bump of around 140% since late September, experts see PROG rising another 45%.

Progenity Inc, is a biotechnology company that develops molecular testing products in the US. With a market cap of $284 million, the company went public last year at $14 per share. Since then, share price has plummeted to below $1, which gave  (PROG)  the infamous label of “penny stock”.

In the past few weeks, PROG has spiked some 140%. As short interest on the stock climbed, the volume of comments on major web forums increased as well. Despite bearishness towards this ticker, Wall Street experts still see upside potential in PROG, which we discuss below.

Figure 1: PROG stock chart since July 2020.

Figure 1: PROG stock chart since July 2020.

Progenity overview

The San Diego-based biotech company is focused on the development of molecular testing products. Progenity’s main tests portfolio include (1) Innatal, a noninvasive prenatal screening test to screen for chromosome abnormalities; (2) Preparent, which screens for carrier status of hereditary diseases prior to or early in pregnancy; and (3) Riscover, a hereditary cancer screen that analyzes genes associated with inherited risk of several types of cancers.

Progenity became a publicly traded company in June 2020, at a $14 share price. The stock dropped sharply to a low of around $0.60 in August, after recent earnings results disappointments, and became a penny stock.

Figure 2: $PROG earnings and revenues history.

Figure 2: $PROG earnings and revenues history.

Wall Street’s tone

Despite Progenity's recent performance having frustrated some, Wall Street experts have maintained their consensus buy rating and average target price of $3.67 — which represents 45% upside from current levels.

The most recent report on PROG was issued by H.C. Wainwright’s Joseph Pantginis, who started his coverage on the stock with a buy rating and 86% upside potential. His bull case is based on the company’s differentiated portfolio and the opportunities that it offers.

"Progenitys differentiated R&D pipeline primarily focuses on employing proprietary ingestible device technologies, in tandem with delivery of de-risked FDA approved therapies. The company predominately seeks to fill an outstanding unmet clinical need for those diagnosed with inflammatory bowel disease (IBD), while advancing the immuno-therapeutic space by developing original means of drug administration and disease investigation.”

Even more bullish, Piper Sandler analyst Steven Mah raised his price target on Progenity to $5 from $3 — 133% upside potential — with a buy rating on the shares. The bull case is supported by the successful completion of Progenity’s validation study for Preecludia, dubbed a "significant milestone". The analyst expects U.S. market opportunity for Preecludia to reach $2.3B.

Much more skeptical, Baird analyst Catherine Schulte reiterated a neutral rating on PROG, forecasting $2 per share for modest 6% downside potential. The analyst maintains the same opinion about the company’s plans to transition to a device-enabled biotech company. However, she sees potential on precision medicine, despite a long road ahead before value is unlocked.

What’s next?

Recent data suggests that PROG has been a bear magnet. Ortex shows that it has a short interest estimate above 60% of the float (see below), which seems abnormally high. According to Yahoo Finance, short interest ratio is a more modest (but still elevated) 13%.

Figure 3: $PROG estimated short interest percentage of free float.

Figure 3: $PROG estimated short interest percentage of free float.

As or if the company’s stock becomes a meme target, high short interest could turn into a short squeeze, assuming exposure encourages retail investors to buy the stock at less than $3.

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(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting Wall Street Memes)