Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Invitae Stock Dropped Today

By Maxx Chatsko - Mar 11, 2020 at 6:18PM

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

Growth stocks often fall the hardest during a market correction.

What happened

Shares of Invitae (NVTA -4.71%) closed down 11.3% today as the broader market continued to fall. Investors are coming to grips that efforts to contain regional coronavirus outbreaks -- in fact, the novel coronavirus was just declared a global pandemic -- will have a significant negative impact on the global economy. And they're adjusting accordingly.

While there wasn't any company-specific news today, growth stocks tend to trade at healthy premiums. That makes them prime targets during market corrections -- and they tend to fall the hardest. 

As of market close, shares of Invitae had settled to an 11.2% loss. The growth stock has now lost 1.7% since the beginning of 2020.

A steadily ascending chart with a sudden decline.

Image source: Getty Images.

So what

The genetic testing company's growth-at-all-costs strategy has excited investors, who have generally been willing to forgo profits today in the hope of generating higher profits tomorrow. But global economic downturns have a funny way of shifting priorities around. 

Invitae reported an operating loss of $244 million in 2019, which was double the total reported in 2018. While the business began 2020 with more than $391 million in cash to plow into expansion efforts and stomach continued losses, investors might be a little less willing to accept that much red ink during a recession, the odds of which have increased thanks to the coronavirus. 

Now what

Growth stocks and volatility tend to go hand in hand in good times. The current market correction is simply amplifying those effects. The main takeaway for investors is that panicking or making emotional money moves isn't going to help the situation. Investors with a long-term mindset shouldn't necessarily expect the opportunity in genetic testing to be affected in the long run if or when a recession hits. Therefore, doing nothing is probably the best bet. If Invitae eases off its growth plans to preserve cash, then even better.

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
$2.83 (-4.71%) $0.14

*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 07/07/2022.

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.