Genedrive (LON: GDR) shares are up some 10% this morning on no real news to boost them. Therefore the assumption has to be that there’s a certain change in opinion about Genedrive and its prospects. The question for us as traders, therefore, becomes what do we think those prospects are?
One thing we should note is that the spread is quite wide, 1.5 p at present, or near 10%. This means that we require a price movement of more than 10% in Genedrive shares – in either direction – to be able to book a profit. We’re thus requiring large movements to create a profit, simple bobbling about doesn’t do it for us.
Of course, there have been such large price movements in Genedrive shares, 17 to 70 and back to today’s 16p. So movements that produce a healthy profit even after that dealing spread are possible.
What we want to know now is whether a similar run-up is likely now. About which it’s possible to take two diametrically opposed views.
The first is the same story that drove that last surge at Genedrive. They’ve developed a speedy covid test. They have also applied for a CE Mark to be able to market it across Europe. It might be that the covid pandemic is over, but the disease certainly hasn’t gone away. There will be organisations across Europe that insist upon those entering taking a test – which is exactly where Genedrive is to market to, to gyms and so on.
Well, OK, that could work. That’s what the excitement in December was about, that it might. Evidence that it does could well rive the shares back up to where they were when it was all merely a hope.
It’s also possible to take the opposite view. Sure, there might be some sales of covid tests but the mass contracts for million upon millions of tests are over. We’re back into a world of boring plod in gaining retail market share, not windfalls from the government. As Avacta and Abingdon have found out having a test isn’t the windfall it was once assumed to be.
In essence, Genedrive may well have something useful in its speedy test but it’s no longer a game-changer and as such isn’t something that’s going to garner mass orders. So while there may well be sales across Europe there will be the usual selling and distribution costs associated with a box going here, three there, and so on. Rather than three trucks going to the one government order.
As to what’s going to happen to the Genedrive share price in the medium term the logical position to take is that it’s going to move with the balance of market opinion on either of those outcomes. Absent any significant news release from the company that is.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.