Why Seres Therapeutics Inc. Shares Are Jumping Today

By Markets Fool.com

Image source: Getty Images.

Continue Reading Below

What:Shares of Seres Therapeutics (NASDAQ: MCRB), a clinical-stage biotech, are up more than 10% as of 2:35 p.m. EDT after an analyst offered up some positive commentary on the company's stock price.

So what:Seres' investors can thank Vernon Bernardino, an analyst from FBR Capital, for today's share price jump. Bernardino reaffirmed his bullish rating on the stock and issued a price target of $23. Even though that's down considerably from his prior price target of $43, that represents considerable upside from today's sub-$11 share price.

Bernardino stated that he still believes that Seres is still aleader in the microbiome approach to treating chronic diseases, and that short-term pessimism over the failed phase 2 ECOSPOR clinical studyfor its lead compound SER-190 has caused the stock to sell off far too much. In addition, he remains bullish on the company's other clinical-stage compounds, calling out Nestle's agreement to help fund their development as a particularly bullish sign.

Those comments appear to be resonating with the markets today, hence the stock's move higher.

Now what:Seres just reported its second-quarter results, showing a net loss of $27.9 million for the period. That was more than double the loss in the year-ago period, which was mostly caused by increased head count and continued clinical development. Thankfully, Seres ended the quarter with more than $272 million in cash, which the company believes should be enough to fund continued clinical development "well into 2018."

Continue Reading Below

Seeing such a huge cash position and positive note from an analyst should be some comfort for the company's bulls, but there's not doubt that the ECOSPOR study results cast huge doubts about Seres' future. Since all of its other compounds are still in phase 1 or earlier development, it still has a long road ahead before it will start generating product revenue. For that reason, only investors with an incredibly strong stomach for risk and a long-term outlook should consider investing in these shares today.

A secret billion-dollar stock opportunity
The world's biggest tech company forgot to show you something, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here.

Brian Feroldi has no position in any stocks mentioned.Like this article? Follow him onTwitter where he goes by the handle@Longtermmindsetor connect with him on LinkedIn to see more articles like this.

The Motley Fool recommends Nestle. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.