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Why Pacific Biosciences of California Shares Cratered

By Alex Planes – Feb 5, 2014 at 4:27PM

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Is this meaningful? Or just another movement?

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Pacific Biosciences of California (PACB -9.27%) have lost 11% of their value today despite the company's reasonable earnings report. Investors were disappointed by the company's guidance for 2014, which was weaker than expected.

So what: Pacific Biosciences reported a 54% year-over-year rise in revenue to $8.1 million, which was in line with Wall Street's consensus. The company's steep $0.26 loss per share was actually better than Wall Street's consensus by a penny.

Pacific Biosciences also provided some guidance for the upcoming fiscal year. Revenue is expected to rise at least 55% year over year, which would be $43.7 million as compared with 2013's full-year result of $28.2 million. With gross margin guidance falling in the 25% to 30% range and an expectation of $84 million in total operating expenses, investors can probably expect a loss of at least $1.09 per share for the year. Both numbers were worse than Wall Street's consensus, which called for $45.4 million in revenue and a loss of $1.04 per share for 2014.

Now what: When is Pacific Biosciences going to be profitable? This is a company that's never come remotely close to turning a profit and has never shown the slightest ability to generate positive cash flow. While the stock's tripled in the past year, it remains about 60% lower than where it was five years ago, and with good reason. There's no reason investors should be long-term optimistic about a company which seems to only be in the business of repeatedly throwing money into a garbage disposal, especially when other companies in the same field have been profitable for years.

Alex Planes has no position in any stocks mentioned. The Motley Fool recommends Pacific Biosciences of California. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

Pacific Biosciences of California Stock Quote
Pacific Biosciences of California
$9.10 (-9.27%) $0.93

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