Sorrento Therapeutics (NASDAQ: SRNE) Short Sellers Likely Will Be Disappointed

Some stocks have done shockingly well in the midst of a pandemic, and that really shouldn't be a surprise. We've seen explosive growth come out of it since the depths of April's disaster, and Sorrento Therapeutics (NASDAQ: SRNE) has recently emerged as one of the biggest gainers in the field. It may not be a well-known stock, but there's a lot going for this comparatively unknown stock that should have investors paying very close attention.

Huge Gains on Coronavirus-Fighting Potential

We all know how bad March going into April was for stocks this year, but many companies emerged from that morass better off than they were.  Sorrento Therapeutics certainly qualifies. The company closed April 1 at a catastrophically low price of $1.73. By August 10, the stock had grown better than 10-fold to hit $18.82 per share. While the company has given back better than half those gains since, the stock price is still showing at $7.89 as of this writing, which is nearly four times what it was back in April.

Back in May, when the company's value staged that massive climb, it took to Fox News. While there,  its CEO, Dr. Henry Ji, noted that there was a cure for COVID-19, and all it took was a “neutralizing antibody.” Ji further noted that the “neutralizing antibody” in question was likely in Sorrento's control, known as STI-1499. The company claimed that STI-1499 could effectively neutralize COVID-19, or rather SARS-CoV-2, the virus that caused COVID-19.

It was the cure people had been dying to hear existed since about 20 minutes after the first lockdowns started. Given that we're still looking at coronavirus in the field—though by many reports it does seem to be weakening—Sorrento's claims were likely less effective in the real world. However, Sorrento brought out another potential treatment, this time a protein known as STI-4398 that the company claimed could prevent the virus' ability to infect respiratory tract cells. The company kept pushing in this vein, bringing out a coronavirus vaccine candidate that proved effective, if only on mice, and also licensed a test that allowed for rapid-return testing using saliva samples rather than the nasal swabs commonly in use.

Gains Less Effective Than Hoped

Sorrento Therapeutics is shaping up to be a lot like Arthur Clarke's short story “Superiority.” The company is rolling out a range of exciting new weapons against its intended target, but the weapons aren't exactly working as well as expected.

Thankfully, unlike in “Superiority,” Sorrento is working to modify its weapons according to conditions on the ground. It's got therapeutic options, a potential vaccine, and a rapid test platform that's vastly quicker and easier to use than many of its predecessors. Even if the therapeutics and the vaccine fail, the test alone should be worth a lot of investor interest.

That's not to say every investor is interested. Reports suggest that nearly one in four shares of Sorrento Therapeutics were sold short as of August 14, which is a fairly large body of investors who believe that Sorrento's path is pointed downward. However, the corollary to that is that nearly three in four shares are not sold short, which is a much bigger body of investors who expect something will work and mean big things for the company.

Current Research Suggests Good News Ahead

Already, Sorrento Therapeutics is starting to post some good news. Our own research recently noted that sales predictionsfor this quarter at the company will hit $809.71 million. Given that sales estimates are running anywhere from $11.53 million to $1.61 billion, Sorrento is definitely pushing for the high end of the scale.

Better yet, during the same quarter last year, Sorrento posted sales of $5.78 million. So if Sorrento manages to hit the $809.71 million expected, that's a year-over-year growth rate of nearly 14,000%. Even if Sorrento doesn't accomplish anywhere near that, and only manages the lowest prediction of $11.53 million, that's still just a shade under double this time last year. That's an achievement no matter who you are.

With predictions from HC Wainwright upgrading the stock from a $20 price target to a $30 target, with a buy recommendation as well—and other analysts offering rosy, if not quite so rosy, outlooks as well—it's a safe bet that those shorting Sorrento stock will wind up as disappointed as those who shorted Tesla stock over the years.