Bionano (NASDAQ:BNGO) is a small life sciences company. Biotech companies use Bionano’s Saphyr system for researching DNA and to diagnose illnesses caused by genetics. Up until recently, Bionano has had difficulty achieving widespread market adoption for Saphyr. However, BNGO stock has gone on a wild ride over the past year as traders gravitated to Bionano’s shares.

Indeed, BNGO stock was trading for just 60 cents in December. Then, in a short period of time, it reached a peak of $15. Some good, company-specific news, marketing efforts by Bionano, and a short squeeze triggered by Reddit users in January all contributed to the stock’s meteoric rise. Since the winter, Bionano shares have dropped considerably. However, they remain hundreds of percent above where they were prior to this year. So what’s next for Bionano’s stock?

Bionano’s First-Quarter Results

In the first quarter, Bionano deployed 11 new Saphyr systems for its customers. That brings the total number of the machines in service up to 107. Bionano also sold a higher number of nanochannel array flow cells, which are used to service its existing systems, than in the same period a year earlier. Many laboratory-equipment makers install hardware up front and then sell equipment for the hardware that has to be periodically replaced, thereby boosting their recurring revenue.

The company’s Q1 results are encouraging. In fact, they represent a sharp improvement from Q1 of 2020, when Bionano’s user base and revenues declined year-over-year. That decline can be explained away due to the pandemic, however. Laboratory testing and equipment companies generally did not do very well last year, unless they were heavily involved in the Covid-19 testing space.

Still, Bionano is hardly generating overwhelming financial results. It reported Q1 sales of just  $3.2 million. Meanwhile, the company lost $9.9 million from its operations last quarter. At minimum, Bionano needs to more than triple its top-line revenue merely to break even.

The company expects its installed base of Saphyr systems to climb to around 150 by the end of the year. That would be a meaningful improvement versus the company’s current status. Still, it’s far short of what Bionano ultimately will need to become profitable, let alone justify the company’s outsized market capitalization.

Bionano Is a Meme Stock

As Bionano’s operating results show, there is little reason for BNGO stock to be such a volatile name. It makes sense for the shares to have risen a little as the company’s revenue trajectory significantly improved in 2021. Still, if the stock was worth 60 cents in December, maybe it should be trading for $1 or $2 now. But why did it climb to $15?

Bionano soared at the same time that so many other meme stocks such as GameStop (NYSE:GME) blasted off. Many short sellers like to target small, money-losing biotech and health care companies. So it’s not surprising that BNGO stock was easily squeezed.

And then, once the stock was squeezed, Bionano’s management was able to take advantage of the situation by issuing heaps of new stock to the public. As of the end of Q1, the company’s cash balance had reached $362 million, giving it plenty of time and financial firepower to grow its business.

Still, raising cash is only part of the battle. Bionano’s management now needs to find ways to use that capital to generate profits; otherwise, the shares will slide as the buzz around them fades.

The Bottom Line on BNGO Stock

Could Bionano’s business work out in the long run? Absolutely. Its testing equipment has established a meaningful user base. The firm is still small, but it’s growing, and the company appears to have bounced back strongly from its pandemic-induced slowdown. There’s a chance that Bionano will become a mainstay in its testing niche. Additionally, the massive infusion of cash gives the company added staying power.

Does that make BNGO stock a good buy today? Almost certainly not. Buying the stock of  a company with $13 million of annualized revenue and a $1.6 billion market capitalization rarely turns out well.

If Bionano had the best testing gear in the world, perhaps its valuation would be justified. But, judging by the company’s growth rate, it seems like Saphyr is a niche product with a modest addressable market, rather than something that will dominate its field anytime soon. Consequently, the company’s current stock price is dramatically out-of-line with its fundamentals.

On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.