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Should Investors Be Worried About Guardant Health's Slowdown?

By Brian Orelli, PhD and Keith Speights - Mar 13, 2021 at 7:18AM

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The diagnostic testing company's growth may be slowing, but this shareholder isn't worried.

Growth at diagnostic testing expert Guardant Health (GH 5.56%) appears to be slowing down. But the company still expects to put up revenue growth of at least 26% this year, which isn't too shabby. And as contributors Brian Orelli and Keith Speights discuss in this video from Motley Fool Live, recorded on March 1, investors might have nothing to worry about because the company may be sandbagging its guidance for the year ahead.

Brian Orelli: Guardant Health is another company that took a beating last week after reporting fourth quarter earnings. Revenue was $78.3 million, up 25% year over year, and a few million higher than average analyst estimates. The company posted a bigger loss than analysts were expecting though, $0.94 per share versus expectations of loss of $0.57 per share. But who knows what's included in the analyst's expectations. Guidance was $360 million to $370 million. That will be growth of 26% to 29%, which is below the 34% revenue increase they delivered in 2020. Was it the earnings miss or the guidance that has investors most worried?

Keith Speights: I think it was a little bit of both, but I would say I would put more focus on the slowing growth and the guidance. I think that's probably what has more investors worried. Again, I'm a shareholder of Guardant Health. I'm not worried. I think the long-term prospects for this company remain very good. The other thing is just keep in mind, like other companies, Guardant Health sometimes tends to sandbag somewhat with their guidance. They did it last year. Their guidance was well below what they actually delivered. I wouldn't be surprised if that's the case again in 2021. Guardant Health is launching two new products this year. One they just launched actually, it's Guardant Reveal. It's targeted toward recurrence monitoring for colorectal cancer. They also have a tissue assay that they are launching later this year. The company, look, it has a great addressable market that it's going after. It's a leader in liquid biopsy. I'm not worried about one disappointing quarter. I think the long term still looks really good for Guardant Health.

Orelli: Again, just like the other one that we talked about, hasn't been that cheap since the end of January. The big drops probably have somewhat to do with just a run up as people are hoping to invest ahead of the earnings and then when earnings are completely and totally stellar then they sell off. Buy the rumors, sell the news.

Speights: Exactly.

Orelli: It's irrelevant to us long-term investors.

Speights: Exactly.

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