After collapsing 76% on Wednesday, the Zymergen stock price bounced yesterday after famed growth stock investor Wood scooped up shares on the cheap.
Biology manufacturer Zymergen (NASDAQ: ZY) finished Thursday at $14.45, higher by $6.20 (+75.15%).
Although a 75% rally sounds great on paper, it followed a 76% decline the day before.
Wednesday’s collapse came as the company shattered investor confidence when CEO Josh Hoffman stepped down, and the firm said it would no longer expect revenue for 2021.
Furthermore, Zymergen warned the market that revenue would be immaterial in 2022.
Jay Flatley, who assumed the role of interim CEO, was quick to provide an upbeat assessment of the company’s prospects:
“The underlying promise of our business and technology is sound, and I am proud of the work our teams are doing across the organization. We are confident in Zymergen’s opportunities and prospects, although it will take longer to accomplish our goals than previously expected.”
It seems that Flatley is not the only person confident that Zymergen will overcome its problems. ARK invests’ Cathie Wood decided to increase her firms’ holdings by an additional 2.47 million shares.
This caused a rush of buying, sending the Zymergen stock price sharply higher on the day. However, despite the bounce, the stock is still down almost 65% since its listing in April.
The 4-hour price chart shows the magnitude of this week’s collapse. Even after yesterday’s rally, the stock still needs to gain 133% to equal Tuesday’s closing price.
While the bulls will point to Wood’s investment as a positive development, it’s debatable whether Zymergen represents good value at $14.45. ARK invest has deep pockets, and the purchase doesn’t necessarily signal an immediate return to higher prices for Zymergen.
Of course, ARK’s intervention may result in follow-through buying, but that may soon fade. And when it does, buyers will be faced with the prospect that it could be years before the company turns a profit.
Therefore, investors may be wise to see how the stock performs over the next few months before jumping in.
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