It’s been a rocky month of trading for Starpharma Holdings Ltd [ASX:SPL] investors. With the stock hitting a low point of $1.77 just over two weeks ago, only to now rebound back to $2.14 last Monday.
Even daily the stock has shown some wild swings. Case in point, yesterday’s reaction to Starpharma’s announcement that its nasal spray (to fight COVID) would be launched in the UK.
That news saw the stock spike 4% higher at the open of trade. Flying out the gates as investors no doubt saw the upside for this product in a nation that is now grappling with a third wave of COVID.
But that optimism didn’t last long.
By midday, Starpharma shares were down 2%, falling into the red as investors exited the stock. And while shares did finally close in the black, it was no doubt an anxious day for traders.
So, what is behind Starpharma’s ongoing volatility?
Uncertainty and unease for speculative sectors
After reaching a fresh all-time high of $2.52 back in February, SPL shares have suffered a noticeable leg down.
One of the biggest reasons for this decline is certainly due to their rather grim half-year result. With declining revenues (down 89%) and a rising net loss (up 78%).
In other words, Starpharma is losing money, at its fastest rate in quite some time.
But this isn’t unusual for a biotech stock. Especially when they’re on the cusp of releasing a new commercial product. A much-needed source of revenues, and hopefully, profit.
For these reasons, SPL shares have certainly lost ground, but not fallen out of favour entirely. Patient investors are still holding out hope for their products, like the VIRALEZE nasal spray, to deliver a solid return on their investment.
At least, that’s the logic behind it.
And who knows, in a few months from now Starpharma may be able to deliver a much better financial update. It certainly seems like they’ve lucked out in terms of the timing of VIRALEZE’s product launch. With, like I said, the UK in the midst of a huge COVID outbreak.
For shareholders though, and the market at large, it is the uncertainty of this opportunity that is of concern. With plenty of factors, including many outside of Starpharma’s control, that could derail their ambitions.
After all, we’re seeing a lot of the market rotate out of speculative plays lately. Moving capital into more stable, value-oriented assets.
For this reason, the volatile movement of SPL shares doesn’t surprise me.
What’s next for Starpharma Share Price?
Investors will simply need to keep waiting and watching for regular updates. Particularly when it comes to this VIRALEZE launch.
If Starpharma wants any chance of seeing a solid uptrend in its share price, they need a good launch.
Otherwise though, if you’re not already invested in SPL shares, it might be worth giving them a miss. Because unless you’re comfortable with trading extremely volatile stocks, it could prove far more taxing on your own health — both emotionally and financially.
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For Money Morning