What happened

Shares of genetic data miner 23andMe Holding (NASDAQ:ME) had surged 10.7% as of 12:45 p.m. EST Thursday in response to a mixed fiscal second-quarter 2022 earnings report featuring weaker revenue than predicted -- but a much lower loss than feared.  

Heading into the quarter, analysts had forecast that 23andMe would lose $0.11 per share on sales of $55.7 million. 23andMe just missed hitting that sales number, reporting only $55.2 million in sales. However, the company's loss came to just $0.04 per share, beating expectations with one strand of DNA tied behind its back.  

Scientist in lab coat studies a test tube of fluid while looking at a strand of DNA on a computer screen.

Image source: Getty Images.

So what

But here's the thing: As a putative growth stock, what you really want to see out of 23andMe is strong, double-strong sales growth -- and that was sadly lacking in Q2. In fact, sales for the quarter grew only 7%, and indeed decelerated in comparison to the 23% growth pace set in Q1.    

On the plus side, management pointed to the recent "addition of telemedicine and pharmacy services to our Personal Genome Service products and services" as future growth drivers that will give it the ability to "provide consumers with convenient access to personalized, proactive and genetically based health services." Management also noted that its partner in drug development, GlaxoSmithKline, "expects to report clinical data from the CD96 program in 2022," which could turn into a catalyst for stock price growth if the news is good.

Now what

Nevertheless, despite these developments 23andMe wasn't able to raise guidance from its prior prediction of $250 million to $260 million in full-year sales for fiscal 2022 -- and a $210 million to $225 million loss. Even if the recent acquisition of Lemonaid Health doesn't help the revenue number this year, at the very least, you'd think that the after losing about $40 million less money than Wall Street had predicted in Q2, management would have been able to guide toward a smaller loss for the rest of this year.  

That didn't happen. And I fear the investors who are bidding up 23andMe stock today may have overlooked that fact.

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.