Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Invitae Rose as Much as 13.9% Today

By Maxx Chatsko - Updated May 11, 2018 at 12:52PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company's first-quarter 2018 performance exceeded even its own lofty expectations.

What happened

Shares of genetic testing leader Invitae (NVTA 4.10%) soared nearly 14% today after the company announced first-quarter 2018 operating results. While eye-popping growth has been the norm for the young company, triple-digit revenue growth from the prior-year period surprised just about everyone -- including the company itself. 

The fast start to 2018 forced management to increase its full-year guidance for revenue and test volumes. Previously expecting total revenue of at least $120 million and test volumes of 250,000 samples, Invitae now anticipates over $130 million in revenue for the year on 275,000 samples.

As of 1:05 p.m. EDT, the stock had settled to an 11.1% gain.

A man standing on a white column against a blue sky and he's holding a large white arrow cutout pointing up.

Image source: Getty Images.

So what

The consumer genomics market has become possible in recent years thanks to advances in DNA sequencing technology. Invitae has managed to increase its market share in the expanding market, which has led to pretty amazing growth quarter after quarter.


Q1 2018

Q1 2017

% Change

Total revenue

$27.7 million

$10.3 million


Gross profit

$9.6 million

$1.0 million


Operating expenses

$46.1 million

$37.7 million


Operating income

($36.5 million)

($27.3 million)


Net income

($36.1 million)

($26.9 million)


Shares outstanding

54.4 million

42.3 million


Data source: Invitae first-quarter 2018 press release.

Oh, one important detail: Invitae has increased its market share by investing heavily in acquisitions and organic growth -- and it hasn't come cheap. That's evidenced by a net loss of over $36 million in the last three-month period, and also by the incredible amount of dilution endured by shareholders over the years, which has been necessary to provide funding for expanding operations.

Right now, the only focus is on grabbing as much market share as possible as quickly as possible. Then, when the timing is right (or growth slows), the focus can shift to reining in operating expenses, which might allow more revenue to trickle down to the bottom line. It's a well-traveled path by fast-growth companies and can lead to comfortably profitable operations, but the strategy doesn't always work.

Now what

Shareholders will soon find out if profitable operations are at least within reach. Management pledged to reduce cash burn by 40% to 50% as Invitae exits 2018. Considering the business used nearly $33 million in cash in the first three months of the year and had just $130 million in capital available at the end of March, that will be a welcomed move and one that's necessary to reduce mounting losses.

However, the business would still boast an annual cash burn as high as $80 million in 2019 after the reductions. While continued growth should help to offset external funding requirements, investors know they'll be required to stomach even more dilution in the next few years. So although this is a fast-growing business in an important future-oriented industry, stock gains could continue to be largely cancelled out by share offerings in the near term.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Invitae Stock Quote
$2.54 (4.10%) $0.10

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 07/05/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.