Shares of sweetner maker Senomyx (SNMX) are soaring Thursday after Craig Hallum's equity research analysts initiated coverage on the stock with a “buy” rating and a price target at $16.50, nearly double Wednesday’s closing price of $8.35 a share.
Thursday is Sweet for Senomyx
Senomyx’s shares gapped up 7.8% at the opening bell to $9 a share and kept climbing, testing $10 a share with an intraday high of $9.98 just inside the first hour of trading. The stock pulled back sharply from that peak as it appeared to get caught up in a down day for the markets, but shares stayed over $9.00 apiece heading into the afternoon session.
On the whole, Senomyx has been the darling of analysts of late despite failing to turn a profit in more than half a decade. The initiation of coverage by Craig Hallum comes just 10 days after Lake Street Captial initiated coverage at a “buy” rating with a price target of $14 and about ten weeks after Needham initiated coverage at “buy” with a $16 price target on April 4.
Sweetmyx Driving Gains
Senomyx’s current surge can be attributed to its new product, a “sweetness enhancer” called Sweetmyx, was approved by the FDA on March 11, news that prompted a 25% pop for the stock the following day. Senoymx has an exclusive deal with beverage giant Pepsi-Co (PEP) for Sweetmyx.
Senomyx’s technology is based on mapping the human tongue and developing products that can enhance the natural flavors of food based on the chemical interactions between our food and our tongues, including blocking bitterness or enhancing sweetness. Much of the excitement about this technology revolves around the potential for reducing the amount of sugar in food products without a loss of sweetness, something that could be crucial given current consumer trends towards health conscious eating and reducing sugar intake.
"The new Sweetmyx flavor ingredient will enable the creation of lower-calorie beverages and foods that have reduced sweeteners without sacrificing taste," said President and CEO John Poyhonen after Sweetmyx’s approval. "We are particularly excited about the versatility of Sweetmyx since it allows for the reduction of either sucrose or fructose in products."
This Small-Cap Star Shining Brightly
Senoymx is a member of Equities.com’s 2014 Small-Cap Stars, and it’s not hard to see why. The tremendous potential to meet the growing demand for low-sugar alternatives without a loss of flavor has markets high on Senoymx and Sweetmyx. The company’s stock has more than quadrupled in value over the last year, and it’s up almost 80 percent since its addition to the Small-Cap Stars at the start of the year.
The Small-Cap Stars are selected by looking at the historical performance and determining which fundamentals were most predictive of success for a company in that industry, then finding those companies that currently feature a similar profile. In Senoymx’s case, the system worked, as the stock was at $5.16 a share at the inception of this year’s list and currently sits just under $9.25.
Could Senoymx be Set Up to Run Even More in 2014?
And Senomyx’s gains in 2014 are even more impressive when you notice that the company’s given back a decent chunk of the gains it made after the FDA approval of Sweetmyx. The company’s 52-week high, reached on April 2, was $12.74 a share.
However, the pullback from that high is clearly starting to lose its legs. The stock’s chart shows that, since mid-May, there have been a variety of positive technical indicators. The stock has crossed its 20-day and 50-day SMA from below since late May, and the 9-day SMA crossed the 50-day SMA from below just last week. With today’s gains, the stock’s also close to seeing its 20-day SMA also cross its 50-day SMA, a bullish indicator that could spark another round of gains.
All told, it’s looking more and more like the stock’s retreat hit bottom in mid-May and has been gaining with strength since then, with the MACD line crossing the signal line from below just after the middle of last month.
It’s entirely possible that Senomyx has a product tailor-made for the current market, allowing the American public a chance to continue enjoying their sweet drinks while still staying healthy. If Sweetmyx takes off in the way Pepsi seems to think it could, the Senomyx could start posting actual profits to go with its promising technology, something that would likely mean the stock could go considerably higher. Clearly, the analysts covering the stock seem to see this as a real possibility.