For medical genetics specialist Invitae's (NVTA 71.90%) downtrodden investors, there was a lot riding on the company's second-quarter earnings release. An 85% share decline year to date can impart a make-or-break feeling to a fiscal report.

As always, whether the results were a success or a flop is in the eye of the beholder. Still, there were undeniable highlights in the data and, perhaps, a cause for Invitae's shareholders to stage a relief rally.

The buying frenzy that ensued, however, appears overdone and could be a function of mid-2022's short-squeeze revival rather than perceived improvement in Invitae's financials.

Several good points, and one major problem

CEO Ken Knight touted "improvements in several key metrics" during the second quarter, and there's enough data to support this conclusion. Knight pointed to Invitae's adjusted gross margin (40.1% versus 36.6% in the first quarter), adjusted operating expense (146% of revenue versus 169% in the first quarter), and cash burn ($147 million, down $50 million).

The CEO could also have pointed to $136.6 million in quarterly revenue, up 17.5% year over year and nearly in line with the analyst consensus estimate. However, Knight probably wasn't eager to mention Invitae's net loss of $2.5 billion (or $10.87 per share), a stark result compared to the year-ago net income of $133.8 million ($0.66 per share).

Along with "indefinite-lived intangible and asset impairments of $34.8 million," the company said its sizable quarterly loss included "a complete write-down of goodwill of $2.3 billion, which was a result of a significant, sustained decline in the stock price and related market capitalization and a lower than expected financial performance" -- probably not what Invitae's long-term investors wanted to hear.

Maybe a meme, but definitely extreme

Still, Invitae's swing to a net loss evidently wasn't a deal breaker for at least some traders. The day after the earnings release, the stock catapulted 276%, landing at a previously unimaginable $8.63. The CEO's comments on "improvements in several key metrics" were duly noted, but a share-price move of this magnitude is difficult to justify by the data alone.

Granted, there was also recent positive news as the National Comprehensive Cancer Network (NCCN) updated its guidelines, endorsing the universal availability of genetic testing for all patients who have been diagnosed with colorectal cancer. The NCCN's previous testing criteria were limited to certain age groups and cancer types. The new guidelines will, according to Robert Nussbaum, Invitae's chief medical officer, "help identify more patients and their family members who might benefit from genetic assessment."

Fair enough, and the NCCN's announcement did occur soon before Invitae's quarterly earnings report. So there might have been a positive one-two punch, prompting traders to forgive Invitae's swing to a net loss. Still, a 276% jump in one day just doesn't seem right or reasonable.

Could traders have been swept up in a revival of meme trading? The meme hypothesis wasn't quite confirmed, but it could have been supported somewhat as on the very next trading day Invitae plunged 47% to $4.51. Just maybe, there's a lesson here for price chasers and bandwagon jumpers.

As the market comes back to its senses, investors would be well-advised to appreciate Invitae's "improvements in several key metrics" from a safe distance.