Making specialized scientific instruments requires a lot of time spent on research and development (R&D). Still, businesses that succeed in creating killer laboratory hardware can sometimes rake in billions by enabling researchers to approach inquiries that they couldn't otherwise. Enter Bionano Genomics (BNGO 2.70%), a genomics hardware company whose product, the Saphyr optical genome mapping device, is the only technology that can analyze the structural variations of chromosomes at both high efficiency and low cost.

If you don't understand what most of those words mean, don't worry -- it isn't necessary to appreciate this stock's potential. For now, you can think of the Saphyr as a self-contained laboratory apparatus that can cheaply and reliably identify certain features of genomes that researchers and drug developers find interesting. Let's investigate if that might push Bionano's stock to explode in 2023 and beyond so that you can judge whether it might be a favorable investment for your needs.

Wall Street's expectations are sky-high, but will they come to pass?

Bionano's advantage is that using its machine is a lot easier than using alternatives to accomplish the same goal. Traditionally, without the Saphyr, identifying structural variations of chromosomes requires using multiple pieces of hardware and a lot of hands-on time spent toiling in the lab. Think of it as a device that compresses an entire laboratory workflow into a couple of steps, thereby saving time and money. Plus, without the Saphyr, there is also a substantial chance of failing to detect a sample's features of interest altogether. In short, Bionano's machine is innovative because it streamlines a research process and decreases the risks of that process coming up short. And both of those factors are likely to drive the adoption of its product.

Wall Street analysts anticipate, on average, that Bionano's stock price will reach somewhere near $7.38 in 2023, which implies a steep run-up of more than 339% from its current price, near $1.68. Wall Street analysts expect the company to make roughly $45.3 million in sales next year, dramatically more than its trailing 12-month (TTM) revenue of $25.8 million. Two things could drive that growth and share price appreciation: rising sales of Saphyr units and rising sales of consumables for use with the Saphyr. So far, only one of those drivers appears to be working as shareholders might hope.

Utilization is lagging installations, and it could put a kibosh on Bionano's chance of doubling in 2023 

Since the third quarter of last year, the company's installed base of Saphyr units in the wild rose by 54% to reach a grand total of 217. That supports the idea of its product gaining traction among researchers. However, it's still nowhere near the scale nor the pace of adoption that would suggest that it is a revolutionary innovation. Ongoing marketing efforts to let potential customers know they can simplify their laboratory workflow will likely continue to yield more sales.

But, in the same period that Saphyr sales jumped, Bionano's sales of nanochannel flowcells, the consumable cassettes necessary for customers to run samples on the Saphyr, were close to flat. If people were buying the hardware and using it to analyze chromosomes constantly, we would expect consumables sales to skyrocket. That means onboarding new customers isn't reliably leading to persistently higher sales of consumables. Also, those existing customers are unlikely to use their hardware more over time (which would require more consumables). So while more Saphyrs will probably be sold in 2023 than in 2022, the recurring revenue potential of each sale might not be that high, and investors shouldn't look to consumables for top-line growth just yet. 

There are a couple of possible explanations for this unfavorable trend. The first is that customers don't need to analyze structural variations that frequently, so they don't use many cassettes. If that's true, it's bad news for the company's long-term proposition to investors, as it would mean the scientific need for Bionano's product would probably not sustain a large market for solutions. The second explanation is that the customers who own Saphyrs largely do not have enough money to run samples that frequently, even if they might want to, because they find the cost of cassettes to be prohibitively high. If most Saphyr systems are installed in academic laboratories or non-profit research institutes, it's easy to see how that might be the case -- and it implies a discouraging outlook for the stock's value.

As you can see, the road to Bionano's stock soaring in 2023 is far more fraught than Wall Street's estimates suggest. Robust sales growth of Saphyrs could still carry the day, but this company is a risky bet that is probably not a good fit for most investors. If sales of consumables start to pick up next year, it'll be a strongly positive sign for the future, but falling short of monster growth predictions in the short term is quite likely.