What happened

Shares of Invitae (NYSE:NVTA) fell nearly 20% today after the company reported first-quarter 2019 operating results. The business remains on track to exceed its full-year 2019 revenue guidance of $220 million, according to management. But Wall Street was embarrassed by its expectation for $47 million in revenue during the opening quarter of the year. The company reported just $40.5 million. 

Aside from that discrepancy, the genetic testing leader made progress on multiple fronts. It expanded the number of direct sales to patients, reduced cost of goods sold, and captured a 101% year-over-year increase in gross profit. All of the increase was poured into swelling operating expenses, but that's hardly a surprise considering Invitae is furiously investing in growth opportunities.

As of 11:38 a.m. EDT, the stock had settled to a 17% loss.

A stick figure trying to pull a falling arrow up.

Image source: Getty Images.

So what

CFO Shelly Guyer noted a few reasons for the lower-than-expected revenue total on the first-quarter 2019 earnings conference call. There were lower one-time purchases of tests during the quarter, while lower rates of reimbursement from Medicare kicked in at the beginning of January. Meanwhile, selling tests directly to patients is great for growth, but it lowers the average selling price per sample.

While the direct-to-consumer efforts comprise the bulk of the company's growth strategy, Invitae did deliver a 19% year-over-year reduction in cost of goods sold in Q1 2019. That helped to drive gross profit and gross margin higher and keep operating losses in check.

Now what

Considering management kept its full-year 2019 guidance intact and thinks the business is on pace to top it, Invitae must be on the cusp of some incredible surges in revenue in the coming quarters. More impressively, management thinks the business can achieve more than $500 million in revenue in 2020. That would mark a more than doubling of revenue from this year to next and would likely get the company to profitable operations. Now the business just has to execute.