What happened

Shares of 23andMe (NASDAQ:ME) rose more than 9% on Tuesday. The stock, which closed at $11.36 on Monday, opened at $11.40 and rose as high as $12.44 at midday on Tuesday. The stock has been as low as $7.01 and as high as $18.16 over the past 52 weeks. So far this year, shares are up a little more than 3.7%. The company, founded in 2006, went public via a merger with a special purpose acquisition company (SPAC) in June. It offers services for users seeking health and ancestry information from their DNA.

So what

Investors are still digesting what the company's prospective $400 million purchase of telehealth start-up Lemonaid Health, announced on Oct. 22, means. On the one hand, Lemonaid isn't profitable, but on the other, the move may allow for the synergy of 23andMe's genetic database to be used to help primary care initiatives. Initially, the company's stock fell on the news, but perhaps on further reflection, investors see a big opportunity for 23andMe.

Scientists examines DNA models in genetic research laboratory.

Image source: Getty Images.

The thought is that the merger will allow 23andMe to use personalized genetics to treat primary care patients on Lemonaid's telemedicine platform, giving patients better care regarding treatments and by understanding health risks. Many inherited diseases -- such as Duchenne muscular dystrophy, sickle cell anemia, or cystic fibrosis -- can be traced to a variant in a single gene.

Now what

While 23andMe is growing revenue, like Lemonaid, it isn't profitable yet, but its genetic database of 11.6 million people is something that has plenty of value. In the first quarter, 23andMe's first period as a public company, it reported revenue of $59 million, up 23% year over year. However, it lost $42 million, $6 million more than it did in the same period last year.

The company has said it sees revenue growth through adding to its subscriber base, by offering pharmacogenetics, heart health reports, and polygenic risk scores to subscribers. As of March, the company reported that it had 125,000 subscribers.

Considering the stock's low price, it will continue to be volatile for a while. The company said it expects to make revenue this year of $250 million to $260 million, with a net loss of $210 million to $225 million. Its genetic database offers numerous opportunities to drive revenue, but until the company starts seeing more-pronounced revenue gains, investors will likely stay wary.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.