What happened
Shares of Invitae (NVTA +0.00%) fell as much as 15.5% today after the company reported fourth-quarter and full-year 2019 operating results. The genetic testing company delivered impressive growth in 2019 compared to the prior year, including year-over-year increases of 47% in revenue and 59% in test volumes.
Despite the solid results, Wall Street analysts were expecting $68.1 million in fourth-quarter 2019 revenue. Invitae reported "only" $66.3 million. While the difference was insignificant in the grand scheme of things, it doesn't take much to derail a volatile growth stock.
As of 1:49 p.m. EST, shares had settled to a 11.2% loss.
Image source: Getty Images.
So what
On the one hand, the harsh reaction to the miss on fourth-quarter revenue is certainly an overreaction. Invitae performed well in 2019 and made important strides to expand its business. It launched new tests, formed new partnerships, and joined major health insurance networks.
On the other hand, the genetic testing company reported an operating loss of $244 million in 2019. Investors have accepted steep losses as the price of owning a high-growth company, but the losses are unsustainable.
|
Metric |
2019 |
2018 |
Change |
|---|---|---|---|
|
Test volume |
482,000 |
303,000 |
59% |
|
Revenue |
$216.7 million |
$147.7 million |
47% |
|
Gross profit |
$98.7 million |
$67.6 million |
46% |
|
Operating income |
($244.1 million) |
($122.5 million) |
N/A |
|
Cash flow from operating activities |
($145.0 million) |
($92.2 million) |
N/A |
Data source: Company press release.
Now what
Investors can only hope that a high rate of growth eventually translates into operating profits. For 2020, Invitae expects to achieve more than $330 million in revenue and process at least 725,000 tests, representing year-over-year increases of over 50% for each metric. That should help to create a path to profitability, assuming operating expenses can be held in check. But for the foreseeable future, investors should expect the stock to remain volatile.
