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Why Schrödinger Dived by Almost 12% Today

By Eric Volkman – Nov 11, 2021 at 6:58PM

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The company plunges sharply into the red on the bottom line in its Q3, and misses analyst estimates.

What happened

Healthcare tech stock Schrödinger (SDGR 9.66%) was looking a bit sickly Thursday. After the company reported third-quarter earnings that missed on both the top and bottom lines, investors sold out of the shares, leaving the stock with a nearly 12% decline on the day.

So what

For the quarter, Schrödinger booked revenue of $29.9 million. While that was up by 16% on a year-over-year basis, it didn't meet the average analyst estimate of just under $31.6 million.

Scientist using a microscope in a laboratory.

Image source: Getty Images.

Meanwhile, Schrödinger flipped into the red on the bottom line, and dramatically so. The quarter's net loss was a shade over $35 million ($0.49 per share), against the Q3 2020 net profit of almost $3.9 million. Analysts counted on the company landing in the red, but not quite this deeply -- their average per-share net loss estimate was $0.43.

The company, which specializes in harnessing artificial intelligence (AI) solutions to help biotechs and pharmaceutical companies in the drug discovery process, wasn't deterred by the bottom-line ugliness or the double whiff. It clearly believes the future still holds much promise.

Schrödinger quoted CEO Ramy Farid as saying that, "The level of engagement with senior [research and development] leaders across [the pharmaceutical sector] and the growth we are seeing in new software customers suggests a shift in the drug discovery paradigm and a push to incorporate advanced computational approaches into projects at all stages."

Now what

So Schrödinger is still gazing into the crystal ball and seeing business growth. It proffered guidance for full-year 2021 of $124 million to $134 million in total revenue, which represents solid if unspectacular improvement over 2020's $108 million. However, it believes that the growth in operating expenses will outpace the 42% of 2020, a troubling development for short-term profitability.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Schrödinger, Inc. The Motley Fool recommends the following options: long January 2023 $75 calls on Schrödinger, Inc. and short January 2023 $75 puts on Schrödinger, Inc. The Motley Fool has a disclosure policy.

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