SIGA Technologies (SIGA 0.60%) has been one of the hottest stocks on the markets this year. Its monkeypox treatment Tpoxx has led to a spike in revenue, and investors have been optimistic it could generate even better numbers in the future.
It has the potential to become the next big meme stock given the excitement it has been generating. But there are signs that the bubble may already be bursting as Siga's stock price has come under pressure recently and is down close to 50% from the high of $26.99 that it hit in mid-August.
What has gotten investors so bearish on the stock?
NASDAQ: SIGA
Key Data Points
Monkeypox isn't spreading as quickly as feared
There are more than 53,000 cases of monkeypox as of Sept. 2, according to data from the Centers for Disease Control and Prevention (CDC). And while case counts are still rising, they aren't nearly at the rate the CDC was projecting.
The CDC estimates that the disease's doubling time is 25 days, compared to just eight days in July. While it admits that it's difficult to predict the growth rate, it says that "there are recent signs that case growth may have slowed further."
It's good news for the world if monkeypox isn't shaping up to be another COVID. But for retail investors betting on Siga's monkeypox treatment, it could leave them with some large losses.
Is the stock headed back to single digits?
A year ago, Siga's share price was around $7. Even with its recent decline, it was sitting at more than double that as of the end of last week. However, there's a real possibility that more of a drop in value could be on the way, especially if fears of monkeypox subside and there isn't huge demand for Tpoxx.
The company has been receiving an influx of orders due to the monkeypox outbreak. And during the period ended June 30, its top line nearly doubled from the prior-year period to $16.7 million.
However, for investors looking ahead, that may be an insufficient reason to hang on to the stock. If sales don't remain elevated, it could be difficult to continue attracting investors given the company's lack of promising growth prospects. Tpoxx is sold primarily as a preventative measure against bioterrorism to the Canadian and U.S. governments, in the event that a foreign entity uses smallpox as a weapon.
Given the softness in the markets this year, it wouldn't be surprising for Siga's stock to fall back below $10, especially if concerns surrounding monkeypox subside. Siga wasn't a top growth stock before the emergence of monkeypox, and there's little reason to expect that will change in the future.
Siga isn't a safe stock to hold
Siga trades like a meme stock with its wild and volatile swings in price, and that can make it incredibly risky for the average investor. As with COVID stocks, investors need to be extremely careful with companies that only receive a temporary boost in sales due to the outbreak of a disease. If there isn't anything to keep the company's sales rising higher after the outbreak is over, then that's a good indicator that the business won't benefit from a higher share price for long.
