Shares of CRISPR Therapeutics (NASDAQ:CRSP) can’t seem to catch a break, now down close to 8% year to date and more than 80% from now-distant 2021 all-time highs. The gene-editing innovator is at the forefront of a profound corner of the biotech scene. But with steep losses and a lack of needle-moving good updates on existing products, it’s become tough to stick with a name that’s become so difficult to value.
Undoubtedly, the genomics firm has no shortage of promise. But with the untimely resignation of its COO, Julianne Bruno, earlier last month, it’s understandable why some investors see some red flags waving. The exit of an exec is never a good sign, even if there’s a legitimate reason for doing so. In any case, it should be no mystery as to why shares of CRSP are so unloved.
Key Points
CRISPR Therapeutics has a lot of short interest baked in. But the stakes are high going into earnings.
Cathie Wood’s share sale and the COO’s departure are concerning. But the stock seems too cheap and too risky to short here.
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CRISPR Therapeutics stock is heavily shorted in the weeks going into earnings
The short-sellers are betting against the name in a big way, with more than 20 million shares sold short as of the middle of April. That works out to just north of 25% of the public float, making the stock a place where bears dominate and could continue to do so for some time. With high short interest, though, comes a shot at a squeeze. And as CRISPR heads into earnings, the shorts who’ve yet to cover their positions could be in for a high-stakes roll of the dice.
Though I’m not a huge fan of CRISP’s trajectory of late, I wouldn’t dare bet against the name, especially since much of the low-hanging fruit has already been plucked by the bears. In any case, the company’s coming quarterly earnings, which are on tap for May 14, 2025, are sure to cause nothing short of a volatility storm. For a company that’s topped earnings estimates for three straight quarters, the shorts are playing a dangerous game as we head into an environment where it may not take all too much to send shares flying higher again.
Cathie Wood trims her CRISPR position.
Famed innovator Cathie Wood may have trimmed her position recently, offloading over 354,000 worth of shares. But she’s still a massive believer in the powerful growth potential of gene-editing. Whether it’s CRISPR that’s the firm that seizes the potentially generational opportunity at hand remains the big question. Either way, Wood’s CRISP share sales aren’t a huge vote of confidence as we head into earnings season. Though I don’t view the trim as a harbinger of bad things to come for the Spring, I find it’s difficult to get bullish, as shares have struggled to hang onto any hint of a relief rally.
On a more encouraging note, Wood did highlight CRISPR as one of the names that could rise out of an economic recession in a stronger spot. With plenty of skin still in the game, I continue to view the Ark laggard as a dangerous name to short, especially going into a much-anticipated quarterly result. With such low expectations put in place by analysts and a valuation that actually seems more indicative of a deep-value stock rather than one capable of explosive growth (1.69 times price-to-book (P/B)), perhaps I’d be more inclined to be bullish than bearish at less than $39 per share.
The bottom line
Casgevy, a gene therapy developed alongside Vertex Pharmaceuticals (NASDAQ:VRTX), has shown plenty of promise. And while the rollout has been rather lackluster, I certainly wouldn’t discount the treatment’s ability to make up for lost time. With so much innovation going on under the scenes and a good amount of cash on the balance sheet to absorb more losses, CRISPR stands out as a name that could turn at any time. Shorts, beware!
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