The number of Coronavirus cases crosses 100,000, stocks plummet to multi-year record lows on the Black Monday of 2020, and Italy is forced into lockdown. Pretty grimm news for people around the world, investors and governments. Just when we thought things could not get any worse the World Health Organisation (WHO) labelled the Coronavirus a pandemic.

Investors were instantly impacted as the ASX tumbled 5.6% yesterday. Showing the world how the coronavirus fear is now well entrenched in the markets. While the you know what seems to be getting worse and worse by the minute investors are beginning wonder whether the coronavirus solution stocks will continue to surge?

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Today we are discussing why the Coronavirus stock Zoono Group (ASX: ZNO) dropped 28% over seven days and whether the WHO’s announcement will fuel any growth?

 

ZNO’s story so far

Zoono is a manufacturer of antimicrobial hand sanitisers. The global biotech began experiencing serious traction in the back end of February. Coincidentally, once the Coronavirus started to wreak havoc on the market.

Since the Chinese began reporting COV-19 cases in January ZNO have released four noteworthy Price Sensitive Events (PSE’s)

PSE one: Exclusive Childcare and Hotel agreement for China – 10th February

PSE two: Financial update – 19th February

The unprecedented demand for hand sanitiser significantly boosted ZNO’s sales for the current quarter. Within seven weeks ZNO generated NZD 3.5 million in sales. Which is substantially higher than there full-year sales for 2019 being NZD$1.78 million.

PSE three: Results from Eagle and Zoono Distribution agreement -28th February 

PSE four: ZNO’s successful lab test – 28th February

Here ZNO announced that its “Zoono Z-71 Microbe Shield hand sanitiser” tested more than 99.99% effective against the virus.

The combination of these four PSE’s and the escalation of the coronavirus caused ZNO to skyrocket 172% in a month.

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Why is ZNO down 28% for the week?

Okay, know that we understand ZNO’s story we must ask ourselves why the biotech is down while the Coronavirus is still alive.

  • Zoono can be an illiquid stock

ZNO is a day trading stock or at most a share only purchased during the coronavirus. The unpredictability of the coronavirus is causing investors to strike while the iron is hot by snapping up a quick profit and then escaping before any volatility arises.

 

  • Fear

Even Coronavirus solution stocks are not immune to being infected by negative news. Thus, it is no surprise that on the “Black Monday of 2020” we saw ZNO fall 31%.

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Could ZNO surge again?  

Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.

It is difficult to predict ZNO’s future movements. Especially, when it is jumping up and down like a tapping finger. However, if the criteria below were to occur then there is a high chance ZNO could surge again.

  1. More Coronavirus Fear = Investors would expect the contagion to continue and thus rally behind ZNO
  2. Continuation or increased hand sanitiser shortage = ZNO would manufacturer more to service the demand possibly driving up the price
  3. Any future ZNO event that the ASX website deems price sensitive (Note: Look for a little red dollar sign)

Do not base your investment decisions purely on the criteria above. Your own research is still required.

If you do invest, be careful. Because from personal experience, when I got in ZNO I had to watch the screen almost every 5 minutes. In the fear that the volatility could push me into the red zone.

Here is our free, uncomplicated, and extensive ASX portfolio

https://youth-investment-group.com/portfolio/

 

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The information above should not be taken as financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.

 

Written by Patrick McLoughlin, Associate of YIG.

 

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