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Why LifeStance Health Group Fell 24% on Tuesday

By Eric Volkman – Nov 9, 2021 at 6:31PM

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The company whiffed big on its third-quarter earnings as operating expenses continued to rise steeply.

What happened

One of the newer healthcare companies on the stock market, LifeStance Health Group (LFST 2.08%), wasn't a favorite of investors on Tuesday: Its stock price cratered by more than 24% in response to its latest earnings report.

So what

LifeStance, which concentrates on mental health solutions, actually posted mixed results for Q3. It earned $173.8 million in revenue for a healthy 70% year-over-year increase. On the flip side of that coin, though, its net loss deepened considerably to $120.5 million ($0.35 per share) compared to its Q3 2020 net loss of $3.3 million.

The growth of that red ink reflected LifeStance's soaring operating expenses: In Q2, they more than tripled year over year.

Medical professionals conferring in a hospital lobby.

Image source: Getty Images.

While analysts had collectively only been modeling for $171.4 million on the top line, they were expecting a much smaller net loss of $0.24 per share.

LifeStance's revenue growth during the quarter was attributable to the company's success at drawing in new mental healthcare providers. Its added 400 net clinicians in the period, bringing its total to 4,375. In its earnings release, the company said that this is "demonstrating that the company's value proposition is resonating, despite challenging dynamics in the U.S. labor market."

Now what

Management reiterated its previous guidance for the full year, adding only that it now expects revenue to fall more toward the lower end of the proffered $668 million to $678 million range. As with the third-quarter results, that's basically in line with the $670 million consensus estimate of analysts. 

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