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Here's Why Guardant Health Fell 20% in March

By Maxx Chatsko – Apr 9, 2020 at 8:23AM

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Growth stocks were among the worst performers during last month's correction.

What happened

Shares of Guardant Health (GH 3.21%) fell 20% last month, according to data provided by S&P Global Market Intelligence. The S&P 500 tumbled 12.5% in March as investors grappled with the uncertainty of the coronavirus pandemic. Few stocks were spared, but growth stocks were among the worst performers because they tend to trade at premium valuations. Therefore, they had plenty of room to fall.

Investors should still consider the unique risks facing Guardant Health in light of current events. Operations are likely to be negatively impacted by the coronavirus pandemic, especially as individuals and doctors decide against non-essential medical procedures.

A steadily ascending chart that shows a sudden decline.

Image source: Getty Images.

So what

Guardant Health is developing a portfolio of blood tests that can detect and amplify faint signals left behind by cancer cells. These tests, called liquid biopsies, could simplify the detection of various types of cancer, especially when they allow doctors to avoid invasive tissue biopsies. 

The business has capitalized on the opportunity in recent years. Full-year 2019 revenue jumped 136% from the year-ago period to $214 million. While Guardant Health reported an operating loss of $82 million last year, the company would be crazy not to invest in growth. It expects full-year 2020 revenue of at least $275 million.  

Of course, the coronavirus pandemic might press pause on the company's growth trajectory. It's reasonable to expect testing volumes to be negatively impacted by social distancing, orders for most Americans to stay indoors, and the nationwide canceling of non-essential tests. Investors appear to be preparing for that scenario: The stock has recovered little ground as of early April.

Now what

Whether Guardant Health has to revise full-year 2020 guidance or not, investors with a long-term mindset shouldn't be overly concerned. The business began the year with $792 million in cash. It's also worth pointing out that the company routinely underpromised and overdelivered in 2019. That could leave a little more wiggle room for dealing with the current uncertainty.

Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Guardant Health. The Motley Fool has a disclosure policy.

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