Synairgen rockets 450% on positive Covid-19 trial news! Is now time to buy?

Synairgen shareholders are popping corks today as the share price soars. Are positive Covid-19 trial results reason enough to buy?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Synairgen (LSE:SNG) early investors have made a fortune today after the Covid-19 testing firm reported breakthrough trial results.

The AIM-listed biotech reported positive results from an early trial of its SNG001 drug.

Synairgen said its respiratory coronavirus treatment produced a 79% lower risk of patients developing severe disease compared to those given a placebo.

Patients who received the inhaled interferon beta drug were “more than twice as likely to recover over the course of the treatment”, the UK company said.

Shares soared over 5oo% in the early hours of trading on Monday, before settling closer to 450% towards the end of the day.

But even with this huge jump, I think Synairgen could go higher.

Buy Synairgen now?

Covid-19 testing firms have been in a pharma arms race since the novel coronavirus first hit our shores.

Those with the best prospects have been propelled to epic new heights.

And there are investors on both sides of the Atlantic keen to profit from buying the winners from Covid-19 testing. So I think there are a multitude of buyers who will support the Synairgen share price at current levels and higher.

This has been backed up by City analysts. Broker finnCap tripled its price target from 120p to 360p on the back of the breakthrough news. That target is 110% higher than the Synairgen share price now.

And all the positive press from the likes of Sky News, BBC, and even CNBC in the US is good for the Synairgen share price.

Caveats

I will put forward a few reasons not to buy Synairgen, for the sake of balance.

This could be a case of ‘buy the rumour, sell the news’. Small, unprofitable, as-yet-unproven companies tend to attract speculators happy to take on massive risk. Their rewards could be spectacular. But if Synairgen can’t bring a product to market quickly, the share price could deflate just as fast as it soared.

I’m also not convinced Synairgen is a share I’d buy and hold for 20 years. This is AIM, after all. Financial reporting requirements are less stringent than on the main market. It is definitely more of a punt than sticking to quality, high-value FTSE 100 shares.

Less than a year ago Synairgen was trading at 6p. Its fair value could be as low as 40p. This is an equation based on earnings per share, annual earnings growth, and return on capital.

There is still a big ‘if’ attached to Synairgen. If hope and hype wanes, the share price will likely trend back towards its fair value.

Buy or sell Synairgen?

When I last covered Synairgen back in April, its market cap was just £75 million — right at the bottom of the range I’d be happy investing in.

With this news of a potential Covid-19 trial breakthrough, the company’s market cap has hit £260 million.

And volume has soared as the market digests the news. 22 million shares had changed hands before noon on Monday 20 July.

So with more liquidity available (more people buying and selling) there is a better chance for investors buying now to get in and out of positions at the price they want.

It’s okay to let others take on all the early risk by investing in unproven companies. I’d still say Synairgen is worth a short-term punt, but don’t put your life savings on the line.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Tom Rodgers has no position in the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »