Evofem Biosciences Stock Forecast: The +187% day, explained

It is not every day that a high court foments a spectacular run in the stock market, but that is what happened on Monday. The US Supreme Court ended the federal right to an abortion in the US in a ruling on Friday, June 24. Ten of the US's 50 states already have a ban on the books that can now be enforced legally. Five more will begin enforcing a ban in August, and another five are expected to ban the procedure in the near future. With at least 40% of the states likely to enforce some type of ban, providers of contraception, birth control, and abortion pharmaceuticals have become a major focus on Wall Street.

Also read: Amazon Stock Deep Dive: AMZN price target at $106 with near-term risks offset by long-term growth

Evofem Biosciences (EVFM) was a penny stock few had ever heard of last Thursday. On Monday it soared 187.7% to $1.07 and then added another 24.3% in Tuesday's premarket to reach $1.33. This is all because the maker of women's reproductive health products produces a contraceptive gel that some think may begin flying off the shelves.

Evofem Biosciences Stock News: Phexxi effective in 99% of cases

The gel, called Phexxi, was approved in 2020 and has since raised its approved shelf life from 30 months to four years. By controlling pH levels, Phexxi reduces sperm mobility and is affective in 99% of cases. The one drawback is that the gel needs to be applied about one hour before sex. 

"When women are denied safe, legal abortion, the importance of access to FDA-approved contraception is greater than it has ever been," CEO Saundra Pelletier said last month.

In addition, Phexxi is undergoing a phase-3 trial to see whether or not it also protects against chlamydia and gonorrhea. Results will not be available until late this year.

Despite zooming up by over 200% in the past few sessions, EVRM stock remains down 94.1% over the past year. This is primarily due to Evofem's history of investor dilution. Since 2018 Evofem has increased the share count by about 660%. Just in May the biopharma microcap announced it would be selling another 22.665 million shares of common stock, 12.835 million pre-funded warrants, and warrants to purchase up to 71 million shares of its common stock for approximately $26.6 million. This style of finance makes it an unlikely candidate for any long-term investors. 

Evofem Biosciences Stock Forecast: $1.95 or $2.40 next price targets

It is always hard to apply technical analysis to penny stocks on the move, but EVFM stock has already surmounted immediate resistance at $1.01 and $1.23. The 161.8% Fibonacci level sits at $1.95, and that seems like the only logical next price to take profit at. There is nothing in between.

Above there sits $2.40, which acted as a sort of small, momentary support ledge in early May. Beyond $2.40 are $3.50 and $5.55. $3.50 has a lot going for it. First, the "1" level on the Fibo extension chart is just above at $3.59. The 100-day moving average also coincides with $3.59 at the moment but will continue to trend lower. Then there is the fact that $3.50 already worked as resistance in mid-April. 

$5.55 acted as resistance in late March and additionally coincides with the 23.6% Fibo extension at $5.60. All of these price targets show promise, but remember that the 80 million-plus outstanding warrants are mostly exercisable at $0.75. Beware that a flood of new shares may imminently arrive to put a stop to this rally.

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