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Why Livongo Health Stock Is Up Big Today

By Brian Feroldi - Nov 7, 2019 at 3:40PM

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Shares rose by double digits after the company reported expectation-smashing third-quarter results and issued bullish guidance.

What happened

In response to the company reporting third-quarter earnings, shares of Livongo Health ( LVGO ), a provider of real-time health coaching for chronic diseases, rose 15% as of 3:02 p.m. EST on Thursday.

So what

Livongo's third-quarter numbers looked great:

  • Revenue jumped 148% to $46.7 million.
  • Adjusted gross margin was 75%.
  • Net loss was $19.7 million.
  • Non-GAAP (adjusted) net loss was $3.4 million, or $0.05 per share. That was less than half of the $0.13 loss per share that Wall Street was expecting.
Shadow of a stock-market bull on a page of stock results

Image source: Getty Images.

Management also shared upbeat guidance with investors:

  • Fourth-quarter revenue is expected to land between $49.0 million and $49.5 million. That's much higher than the $45.9 million that Wall Street was expecting.
  • Fourth-quarter adjusted EBITDA is expected to be between negative $5.5 million and negative $5.0 million.
  • Full-year 2019 revenue is now expected to come in between $168.5 million and $169.0 million. That's also nicely above the $161.9 million that traders were modeling.
  • Full-year 2019 adjusted EBITDA is expected to be between negative $26.7 million and negative $26.1 million.

Given the expectation-topping results and guidance, it isn't hard to figure out why shareholders are having a good day.

Now what

There's a lot going right at Livongo Health today. Revenue is growing rapidly, gross margin is strong, the net loss is shrinking, and the opportunity ahead of the business is huge.

There's no doubt that the stock is pricey -- shares trade for more than 18 times trailing sales -- but the triple-digit growth more than justifies the premium. I think this is a growth stock that's easy to root for, and investors should get to know it.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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