Zymergen Stock price gives back a third of the bounce: What next for ZY?

Summary:

After doubling from last week's low, the Zymergen stock price has turned lower. Can ZY reverse the slide, or is the dead cat about to hit the ground?

After doubling from last week’s low, the Zymergen stock price has turned lower. Can ZY reverse the slide, or is the dead cat about to hit the ground?

Zymergen (NASDAQ: ZY) made headlines last week when the stock collapsed 76% on Wednesday following the resignation of its CEO and a revision to 2021 revenues.

However, the news that ARK invest’s Cathie Wood was buying she dip sent Zymergen soaring on Thursday. Although the rally was short-lived, and in three days following, the 100% bounce from the $7.86 low has shrunk to 32%.

Furthermore, a class-action lawsuit may force more pressure on the already struggling Zymergen stock price.

Business wire reports that law firm Kessler Topaz Meltzer and Check, LLP is bringing a securities fraud lawsuit against the biomanufacturing company.

Zymergen overestimated demand for its products; (4) as a result of the foregoing, Zymergen’s product delivery timeline was reasonably likely to be delayed, which in turn would delay revenue generation

So is there a price that ZY becomes attractive?

ZY price forecast

Of course, unless the company is going out of business at some stage, the price will undershoot the fundamentals. Although, considering the dour trading update and legal troubles, when is hard to say.

On that basis, investors should exercise caution and wait for some clarity on the situation. However, many will view that following Cathie Wood has been a good strategy over the last few years. And they may be right. However, Zymergen is a tiny fraction of her holdings. And if you can’t resist buying the stock, the safest bet would be to make it a small percentage of yours.