Global stock markets have tumbled on fear that social distancing and sheltering in place is causing a significant slowdown in economic activity. The iShares Russell 2000 Index ETF has lost almost 40% of its value in 2020, and Invitae, which is a member of that index, was down roughly 25% year-to-date through Tuesday's close.
On Wednesday, investor optimism that U.S. federal government stimulus package will ease the rate of decline in gross domestic product sparked a rally, forcing short sellers to cover bets on falling prices and prompting investors to reconsider the outlook for growth stocks like Invitae, a healthcare company that provides neonatal and cancer genetic screening to parents and patients.
As of March 13, over 22 million shares, or 25.7% of Invitae's shares available for trading were held short, despite the fact that the company generated revenue of $216.8 million in 2019, up 47% from 2018.
Invitae's goal is to reduce its cost per test to levels that allow it to provide genetic screening to everybody. In 2019, it cost the company just $245 per sample on average to perform a test, down 7% year over year. For perspective, it performed just 150,000 tests at an average cost of $335 per test in 2017.
In 2020, the company's guidance is to perform over 725,000 tests, generating over $330 million in sales. If it can deliver on its revenue outlook, it would represent top-line growth of more than 50%. The outlook is encouraging, but investors should realize management is reinvesting heavily back into its business to gain widespread use of its tests. As a result, its operating costs were $461 million last year, resulting in a net loss of $242 million.