T2 Biosystems (NASDAQ:TTOO) stock can officially be added to an unfortunate list that includes fellow meme stocks Mullen Automotive (NASDAQ:MULN) and Meta Materials (NASDAQ:MMAT). What’s the list? Well, these companies seem simply unable to rally, even in the face of good news.
Yesterday, the biotech firm announced that its T2Biothreat Panel had received clearance from the U.S. Food and Drug Administration (FDA). As this clearance allows the company to begin selling and marketing its molecular diagnostic test in the United States, it should be a growth-driving catalyst for T2. But since markets opened today, TTOO stock has been in a race to the bottom. As of this writing, shares are down more than 25%.
Of course, today’s price action should be a highly discouraging sign for even highly motivated real investors.
What’s Happening With TTOO Stock?
Despite a surge yesterday, TTOO stock has spent today trending downward at a fairly quick pace. Indeed, T2 has also spent most of September trending downward and, even with yesterday’s gains, it remains firmly in the red for the past one month. If the stock keeps falling, the initial bump it received yesterday will be rendered irrelevant.
On paper, there’s no reason that the T2Biothreat Panel shouldn’t help TTOO stock rise. The company describes the panel as “the first and only FDA-cleared product able to simultaneously detect […] six high-priority biothreat pathogens, and the only FDA-cleared multi-target biothreat product developed and manufactured by a U.S. owned company.” That sounds like a product with the potential to make a splash. But since yesterday’s meme momentum subsided, the market doesn’t seem to care about the news.
That’s likely because TTOO has been an unstable meme stock that hasn’t displayed much real growth potential before. Earlier this month, InvestorPlace’s Thomas Yeung predicted that, without an FDA approval to send shares soaring, TTOO stock would go into a downward spiral following a planned reverse stock split. Now, the company has received some good news from the FDA but the stock is still plunging.
Yeung said further about T2 Biosystems:
“The company could even go bankrupt. T2 received no contribution BARDA research contribution revenues last quarter, which means that it’s $16 million of remaining cash could run out by the end of the year. Falling share prices will make at-the-market offerings more difficult.”
As Yeung noted, there is still hope for this company. That said, after this week’s events, it’s hard to be optimistic. TTOO stock appears to respond better to meme momentum than actual, company-specific growth catalysts. And as data from ApeWisdom makes clear, retail investors are seemingly losing interest in shares.
The Bottom Line
Yeung cautioned investors that “the fun is over for TTOO stock,” at least for the time being. That hasn’t changed. In fact, if anything, that’s even more true now.
Investors are being forced to face the fact that this meme stock can’t sustain momentum when it catches a break. All told, plenty of other options in the biotech space could offer investors much more stable exposure to growing markets. Even other penny stocks are better bets than T2 at this point. Today’s performance should be a stark warning to steer clear.
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On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.