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Why Sequenom Shares Jumped

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Sequenom (NASDAQ: SQNM  ) , a genetic analysis solutions provider, rose as much as 18% after the company reported its first-quarter earnings results.

So what: This was one of those rare cases where investors were able to see the good in the bad as the company actually reported a loss per share of $0.26, which is $0.03 worse than expectations and wider than the $0.22 per share loss reported last year. Instead, investors focused on the 158% increase in revenue to $38.5 million (a hair above the estimates, $38.3 million) as its MaterniT21 Plus test for Down syndrome was used more than 35,000 times in the first quarter. Gross margin also expanded 5 percentage points from 31% to 36% from the year-ago period.

Now what: It's the same old story with Sequenom: soaring revenue and widening losses. I'm encouraged to see that operating expenses were down $1 million over the sequential quarter, but the company still has a lot of work to do before it becomes profitable. On paper, I love the potential that genetic solutions companies possess in terms of personalized medical care, but few have the necessary tools right now to translate those products into healthy profits. Sequenom is certainly worth adding to your watchlist, but I'm certainly not buying into its story today after a huge pop and another loss.

Craving more input? Start by adding Sequenom to your free and personalized watchlist so you can keep up on the latest news with the company.

While you can certainly make huge gains in genetic solutions companies like Sequenom, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

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12/31/1969 7:00 PM
SQNM $0.00 Down +0.00 +0.00%
Sequenom CAPS Rating: **