To call Senseonics Holdings (NYSEAMERICAN:SENS) a penny stock isn’t to say it sells for a penny. The phrase refers to any stock with a low price and low market capitalization, and SENS stock currently goes for about $2.70 per share. Such stocks are always speculative, and the low market cap makes them easy for investors to manipulate.
Senseonics makes Eversense, an implanted glucose monitor for diabetics. The latest version can take measurements for six months. The version on the market today runs for just three months, but that’s still longer than its competitors.
Senseonics went public over five years ago in March 2016. It priced its 15.8 million shares at $2.85 each. As of the morning of Dec. 2, the stock was at the same price. This doesn’t mean SENS stock has gone nowhere. There are now almost 446 million shares outstanding.
The SENS Stock Story
The Senseonics story is one of great promise, but not great results. The Dec. 2 market cap of $1.27 billion supports sales of $13.6 million over the last four quarters.
If you have severe diabetes, however, Eversense is cool. The sensor, implanted in an arm, is not much bigger than a thick grain of rice. The transmitter sits outside the arm. It is removable, rechargeable and water resistant.
It’s also pretty accurate. The data runs through a service provider called Ascensia, which was created from former units of Panasonic (OTCMKTS:PCRFY) and Bayer (OTCMKTS:BAYRY). You can see the results on a mobile app or a smart watch.
The product has gone through multiple rounds of hype and disappointment. When the hype was high, Senseonics sold stock. When disappointment came in, the price fell.
In September, Senseonics had a premarket approval supplement application before the Food and Drug Administration. The hope was that if the application was approved, sales could jump to $150 million to 200 million in a few years. As things currently stand, you’re paying $6,400 per year for the product and service.
Hopes also ran high when SENS stock was picked up by traders on Reddit. At one point in February, the shares traded at $5.56. Our Chris Markoch recently wrote about Senseonics having the potential for 10x gains in 2022.
The Penny Stock Story
I have a basic prejudice against penny stocks. That is, if these ideas are so great, why haven’t venture capitalists jumped on it? Why does management need your money to reach the market?
In the case of Senseonics, the argument is one of time. It may take a decade for the company’s approach to prove itself. Meanwhile, it faces competition from Dexcom (NASDAQ:DXCM). This rival company has endorsements from singers Nick Jonas and Patti LaBelle and costs $300 per month for a sensor that lasts 10 days. There’s also Abbott Laboratories (NYSE:ABT), which offers a system called MyFreeStyle with a sensor that lasts 14 days.
Senseonics has a long-running, accurate sensor, and if insurers pick it up so the price to patients drop, sales could jump. But it’s not alone in the market.
The Bottom Line on SENS Stock
Senseonics is what I call a “good” penny stock. It’s working on a real product with serious potential. The company has been developing and refining its offering for many years, and the latest version shows promise.
But a small company can only run so fast. A surgical implant that lasts six months won’t win against a service using radio waves inside an Apple Watch.
Even if Senseonics achieves $150 million in sales, you’re still paying 10 times revenue for SENS stock. You don’t know its profitability compared to Abbott and Dexcom. Plus, Apple could blow it out of the water on costs.
The great future Senseonics promises might not arrive.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
On the date of publication, Dana Blankenhorn held a long position in AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial journalist since 1978. His latest book is Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, essays on technology available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn.