Sign InAxcella Health Inc. Sees 280% Surge as Patented Covid-19 Treatment Garners Attention
Summary
Axcella Health Inc. (NASDAQ: AXLA) experienced a surge in stock price after successfully securing a patent grant for its lead candidate, AXA1125, which is being developed to treat fatigue associated with 'long Covid'; however, with a high RSI indicating overbought conditions and the absence of support or resistance levels, the stock may continue to be volatile in the near future despite analysts' bullish outlook and positive sentiment. (September 8th, 2023)
Fundamental Analysis
Axcella Health Inc. (NASDAQ: AXLA) made significant moves in the marketplace recently and garnered significant attention due to the announcement of its successful patent grant. The company successfully secured a methods-of-use patent for its lead candidate, AXA1125, which is currently under development to treat fatigue associated with the enduring aftermath of Covid-19, often referred to as 'long Covid'.
The patent grant for its lead candidate AXA1125 had protagonists in the market taking the stock price up by 280% in just a single day. Such a situation is a clear indicator of the high risk-taking appetite of investors in Axcella, which is a promising scenario for a clinical-stage biotech company.
Yet, on September 8th, 2023, the stock closed at just 0.98 USD after a sudden surge of 70.67%. AXLA hit a year high of 2.49 USD and a year low of 0.104 USD, indicating significant price volatility. The market cap of the company is notably small at just 72.22 million USD, which is quite usual for a clinical-stage biotech company.
Given the EPS, which stands at -0.37 USD, and the negative PE ratio at -2.65, it is clear that the company is not making profits at present and is most likely investing heavily in research and development, a trend common among biotech firms.
Technical Analysis
Next, we will look at the Relative Strength Index (RSI) which is 77. It indicates that AXLA shares are currently in the overbought territory, potentially signaling a short-term pullback. Usually, an RSI over 70 indicates overbought conditions, which can indicate a potential sell-off in the near future.
The substantial increase in volumes (151.30 million against an average of 13.20 million) indicates strong investor interest. The 50 Day Moving Average at 0.22 USD and the 200 Day Moving Average at 0.43 USD reveal that the stock has strongly rallied recently.
On another note, there seems to be an absence of mentioned support or resistance levels – which might contribute to added volatility for the stock.
Predictive Analysis
Moving to the next day trading, given the strong interest in the stock, its recent movement due to significant favorable news, and the lack of resistance levels, AXLA might maintain an upward trajectory. However, high RSI may lead to short-term selling pressure.
For the upcoming week, we need to watch out for spontaneous sell-off episodes due to the overbought conditions signaled by the high RSI. The absence of support or resistance levels will contribute to the volatility, and the stock may continue to trade in a wide range.
Stock Evaluation
With a consensus price target of 6 USD, analysts have a bullish outlook on AXLA stock. Also, most analysts maintain a consensus rating of 'Buy', indicating a positive sentiment for the company's stock.
Given the company's recent annoucement about its new patent, the analyst's consensus, and the strong investor interest reflected in increased volumes, AXLA can be considered a ‘Buy’. However, due to its high risk and volatility, investors are advised to approach the stock with caution and consider adding it to portfolios looking for high-risk, high-return assets.
