What happened
Exact Sciences (EXAS 0.10%), the maker of the noninvasive colon cancer diagnostic Cologuard, posted better-than-expected financial results for the second quarter of 2023 after the closing bell Tuesday. The market, for its part, wasn't impressed. Exact Sciences' stock was down by 11.2% on sky-high volume as of 3:30 p.m. ET Wednesday afternoon.
Although 2023 Q2 revenue jumped 19% year over year to $622 million, Wall Street apparently wanted even more growth to justify the biotech's stately valuation. To wit, the biotech's shares have consistently traded at well over 6 times 2024 projected revenue, which is among the highest valuations within the mid-cap healthcare stock space.
So what
Exact's Q2 report was overall quite impressive. Besides its double-digit rise in revenue, the company raised its 2023 full-year revenue guidance by $54 million. Its net loss for the second quarter also shrank by a noteworthy 51% to $81 million. Rumors swirled immediately following this earnings release that some analysts were hoping to see an even smaller quarterly net loss, but a 51% reduction is substantial nonetheless.
Lastly, Exact exited the quarter with a whopping $775 million in cash, cash equivalents, and marketable securities. The biotech, in turn, ought to have ample funds to develop additional value drivers and to support Cologuard's ongoing commercialization. Put simply, the market appears to be overreacting to yesterday's fairly strong Q2 report.
Now what
Is Exact stock a buy on this pullback? I think so. Exact's core diagnostics business is performing admirably, evidenced by the biotech's solid quarterly results. Hence, this pullback comes across as a stellar buying opportunity.
