Businesses that do not make money do not necessarily see their stock prices go down. Amazon.com, for example, experienced losses for many years after going public but those who held onto their shares since 1999 have seen significant gains. However, it’s important to consider the risk that a loss-making company may run out of cash quickly.
MacroGenics (NASDAQ:MGNX) shareholders may be concerned about the company’s cash burn. Cash burn refers to the amount of cash a company spends each year to support its growth. In March 2024, MacroGenics had $184 million in cash with no debt. However, its cash burn over the past year was $114 million, giving it a cash runway of around 19 months. While this is not alarming, it indicates that the company needs to reduce its cash burn to extend its runway.
MacroGenics has significantly increased its cash burn in the last year, while its operating revenue has declined. This raises concerns about the company’s future trajectory. Shareholders should pay attention to how MacroGenics manages its cash, as the cash burn could impact returns.
With a market capitalization of $267 million, MacroGenics’ cash burn represents about 43% of its market value. If the company needs to raise more cash, issuing shares could dilute shareholder returns. Investors should monitor how the company plans to address its cash burn.
In conclusion, while MacroGenics’ cash runway is reassuring, its declining revenue is a cause for concern. Shareholders should closely monitor the company’s cash management practices. Additionally, it’s important to conduct a thorough analysis of the company before making any investment decisions.