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Why Exact Sciences Stock Sank Today

By Keith Speights - Feb 17, 2021 at 3:01PM

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The company reported disappointing Q4 results.

What happened

Shares of Exact Sciences (EXAS -1.54%) were sinking 9.2% as of 2:52 p.m. EST on Wednesday. The decline came after the diagnostics company reported disappointing fourth-quarter results following the market close on Tuesday.

Exact Sciences announced Q4 revenue of $466.3 million, up nearly 58% year over year and above the Wall Street consensus estimate of $446 million. However, the company's net loss of $436.8 million, or $2.79 per share, was much worse than the average analyst estimate of a net loss of $0.22 per share.

DNA with a reddish tint

Image source: Getty Images.

So what

The big bottom-line miss really shouldn't be worrisome to investors. Exact Sciences' research and development expense was much greater than what analysts projected due to the acquisition of Base Genomics. Adjusting for this acquisition expense, the company's net loss would have only been around $25 million -- better than Wall Street's estimate.

However, Exact Sciences trades at a premium valuation. And the healthcare stock has been on a roll, rising 67% from the beginning of 2020 through Tuesday. High-flying, high-priced stocks tend to tumble when there's any bad news.

The best thing for investors to do is to focus more on Exact Sciences' underlying business prospects instead of the volatility of its share price. The company is going after an annual addressable market of around $50 billion with its cancer screening and diagnostic products. It doesn't have to capture all of this market for its stock to have plenty of room to run. 

Now what

Don't expect Exact Sciences to report blowout first-quarter results. The company expects screening and COVID-19 testing revenue will decline sequentially. However, the long-term prospects for Exact Sciences continue to look promising.

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