Why Invitae Corporation Stock Jumped 23% This Week

What happened

Invitae Corporation (NVTA 19.07%), which specializes in medical genetic testing, saw its shares climb as high as 23% this week, according to data from S&P Global Intelligence. The stock closed at $2.30 last Friday, then opened on Monday at $2.37. It hit is weekly high at $9 on Wednesday before falling a bit to close the week. The stock has been volatile with a 52-week low of $1.83 and a high of $32.93. The stock is down more than 64% so far this year.

So what

The company’s second-quarter numbers belied expectations and the stock jumped. The company released its report after the market closed on Tuesday. Invitae reported revenue of $136.6 million, up 17.5% year over year, though the company had a net loss of $2.5 billion, or a loss of $10.87 in earnings per share (EPS) compared to net income of $133.8 million or EPS of $0.66, in the second quarter of 2021.

The company reiterated its guidance to say it expected low double-digit growth this year in revenue over 2021.

Now what

The jump in the share was nice, but short, as the stock was back down to a low of $4.34 on Thursday, so that speaks to what was probably a little bit of overexuberance by investors, combined with a lift when some investors, facing a short squeeze, had to cover their shares. Still, in the long term, things are looking up for Invitae. It was encouraging that its revenue climb was felt by all four of the company’s platforms: data/services; rare diseases/other; women’s health; and oncology all saw gains, year over year. It also has seen a rise in non-GAAP operating margin for four consecutive quarters.

One bit of caution is that the company said it has enough cash, at its current burn rate, to last it through 2024. That’s not that far off, so if Invitae doesn’t continue to see increased revenue, it will have to raise money through other means.

There’s a growing number of studies that are calling for more predictive genetic testing to screen for inherited gene mutations that might put a person at a greater risk of getting certain cancers. The potential for growth for Invitae is certainly there, and one study by Market Research Future says the genetic testing market will have a compound annual growth rate of 10.3% and reach a $30.1 billion market by 2027.

Jim Halley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Invitae. The Motley Fool has a disclosure policy.

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