Shares of Invitae (NYSE:NVTA) rose 13% last month, according to data provided by S&P Global Market Intelligence. There wasn't any specific news to spur shares higher, but investors and analysts have been very pleased with recent developments. In fact, the company's market valuation more than tripled from below $300 million in early May to over $900 million -- and briefly over $1.2 billion -- in September.
That had a lot to do with second-quarter and first-half 2018 operating results released in early August. Invitae delivered year-over-year revenue growth of 172% in the first six months of 2018, which makes it one of the fastest-growing businesses in the genetic testing and precision medicine space.
But as a nearly 19% drop since the beginning of October shows, investors will continue to be exposed to higher-than-average volatility with Invitae stock. Here's why.
It's pretty difficult to argue with a triple-digit growth profile. And considering that's happening within a quickly growing market that figures to prove increasingly important to modern healthcare, investors are right to be excited about the long-term potential.
That said, Invitae posted an operating loss of $66.5 million in the first six months of 2018. While the company is confident it can outgrow spending and reach cash flow neutral and eventually profitable operations, that day could be years away. That makes it likely that the genetic testing leader will need to raise outside capital (from a debt or share offering) again. And that makes it likely that the stock will remain volatile going forward.
Invitae offers an intriguing long-term opportunity for investors interested in genetic testing services. However, the competition is fierce and the swift pace of innovation (such as in genetic sequencing) could one day reshuffle the industry with little notice. Nonetheless, if the business continues its incredible pace of growth and begins chipping away at its operating loss in the next several quarters, then it could be worth a closer look.