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 (NASDAQ:PACB), a developer of genetic analysis systems, soared as much as 24% after reporting its first-quarter earnings results after the bell last night.
So what: For the quarter, Pacific Biosciences reported revenue of $11.6 million, more than double the $5.6 million it delivered in the first quarter of 2013. The main boost was the sale of nine PacBio RS-II systems during the quarter compared to just three in the prior year period. Revenue in the first-quarter also included $1.7 million from its diagnostics collaboration with Roche. On the back of higher revenue, net loss for the quarter shrank to $18.9 million, or $0.28 per share, from $21.1 million, or $0.37 per share in the year-ago quarter. By comparison, Wall Street was anticipating just $10.1 million in sales, but a slightly narrower EPS loss of $0.27. Following this news JPMorgan Chase upgraded PacBio to neutral from underweight and kept its $7 price target in place.
Now what: Today is all about Pacific Biosciences' surge in PacBio RS II system sales. Thus far sales of its genetic analysis system have been erratic at best, so the hope from investors is that this quarter could be a signal that PacBio is finally turning the corner. Of course, given its robust research and development budget it could be years before PacBio is profitable, making it one of the riskiest plays among diagnostic device companies. Personally, it's a company I have on my watchlist due my appreciation of its innovative capacity, but as an investment I'd suggest holding off until we see a dramatic reduction in losses.
Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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