Atomo Diagnostics (ASX: AT1) shares are down another 27% to near their starting point. AT1 shares leapt on the link with Lumos Diagnostics - something we said was excessive for both shares. So it has proved for both of them. Yes, it's entirely true that Lumos had a test approved by the FDA. But the 1,000% LDX share price rise on the back of that was excessive. So it has proven to be of course. Atomo rose because it was a supplier to Lumos - but that was even more of a stretch, that that AT1 share price rise could be justified. As it has also worked out - the rise is pretty much gone now, back to the starting point in fact.
The starting point was Lumos: “Lumos Diagnostics (ASX: LDX) (OTCPK: LDXHF) shares are up 500% today. LDX stock is up as a result of the FDA authorising their FebriDx test for use in the United States. Yes, this is important news, this will make a difference to the company. But 500%? It is possible to think that that might be a little bit of an over-reaction.” The too much there is simply that the test is already on sale in most other rich world markets. So this is not like the standard FDA authorisation - which starts the ability to market - but one that only opens up the US. Yes, good and interesting news, but not that good and interesting.
Atomo then rose on the back of that: “Having been wrong once already we're of course hesitant to be so again. But we do think that 1,000% (for Lumos) is a bit much, the announcement isn't that, that, exciting. It's also difficult to see what the revenue gain to Atomo is of the FDA approval. So, we'll retreat to the idea that clearly there's something of a frenzy going on here. And frenzies do end and prices fall back when they do. But it's never really possible to determine when that's going to happen - nor what price will be reached before it does.”
Atomo Diagnostics share price from ASX
As is now abundantly clear that price rise at Atomo was indeed excessive, In fact, we're getting closer to the point where there's no price rise at all when we consider start and end points here. We have repeated that opinion about both Lumos and Atomo.
Small cap stocks can get very over-excited on pieces of news. The difficulty is usually in knowing when the peak of the excitement is going to be but it's usual - not perfectly true, but often enough - that they will fall back soon enough.
