Moreover, a steady stream of capital infusions over the years has caused the share count to swell to 163 million. Investors should assume that the company needs to issue at least 40 million or 50 million more shares in coming years to further fund clinical trials. The company could also choose to sign a marketing deal with a large drug company, which would likely provide an equity infusion in exchange for sales rights, eliminating the need for further dilution.
Lastly, investors are waiting for a financial report regarding NanoViricides’ fiscal fourth quarter, which ended in June. The company’s 10-K for fiscal 2012 was filed in mid-October, so investors will presumably receive this year’s 10-K on or before that date. When the 10-K is filed, investors should read it very closely to identify any possible concerns regarding the current development efforts and cash levels.
While it’s virtually impossible to develop a specific target price for NNVC, we can make some broad assumptions. First, let’s assume that the number of shares outstanding eventually rises to 200 million. Second, let’s assume that the company is targeting an annual revenue opportunity of $500 million. Third, let’s assume that shares are eventually valued at three times revenue, or $1.5 billion. Lastly, let’s assume that NanoViricides has only a 33% chance of success, so reduce that number back down to $500 million.
That equates to $2.50 a share, or about 100% upside from current levels. And if the company successfully brings its key drugs to market, then the ultimate $1.5 billion market value represents a move in the stock up to $7.50, a nearly 500% gain.
Note that this is a high-risk/high-reward stock, and as such, should never comprise more than 5% of your portfolio on an initial investment basis.
Recommended Trade Setup:
–Buy NNVC up to $1.50
— Set stop-loss at $0.75
— Set initial price target at $2.50 for a potential 67% gain in six months
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