This year, Invitae has helped the bears win. But is it possible that the battered stock will benefit in the future?
in 2022, down nearly 85%. This is the situation with Invitae stock (NVTA 0.96 percent). That can’t be portrayed in a positive light. The steep sell-off, on the other hand, is also over.
Is Invitae an option worth considering in the future? Opinions differ. The arguments in favor of and against Invitae stock are as follows:
Argument against: Adria Cimino’s path to positive cash flow: It’s true that Invitae has had trouble turning gains in revenue into profits. However, in July, it made a move that may have set it on the right track. A plan for strategic business realignment was launched by the company. The objective is to get Invitae’s cash flow to positive as soon as possible.
How is Invitae going to carry it out? The company wants to focus on its core business and leave some countries.
For instance, less than a dozen countries will be served by Invitae. It is decided to stick with the ones that are most likely to achieve cash flow goals. Products and programs that aren’t directly related to Invitae’s main genetic testing business will also be halted. Additionally, various efforts to streamline day-to-day operations and job cuts are included in the plan.
By the end of next year, Invitae anticipates achieving annualized cost savings of $326 million if everything goes according to plan. Also, the arrangement ought to stretch out the organization’s money runway to the furthest limit of the next year.
Invitae has reported quarterly earnings since this plan was first announced. Additionally, the business is progressing. Invitae stated in its update for the third quarter that it is on track to achieve its goal of saving money. The business lowered its guidance for cash burn for the full year 2022 to $585 million to $625 million. That is a decrease from the $650 million to $600 million range. This indicates that it anticipates using less cash than anticipated to run its business.
Over the past five years,
Invitae has seen significant revenue growth. As a result, its genetic tests are in high demand. That is unquestionably positive. The shares are currently trading at approximately one time sales. If Invitae achieves the objectives of its realignment plan, this seems like a good starting point.
If you prefer to invest with caution, Invitae is not the best option. In the event that the organization battles to reduce expenses and arrive at positive income, the stock could tumble. However, if you are willing to take some risks, this recovery phase may be the best time to join Invitae.
Case of bear: An excess of hazard in a questionable market
Keith Speights: I think it might be worthwhile to look into Invitae if we were in a raging bull market. We aren’t, though. Instead, a recession may be imminent in the United States. In my opinion, buying Invitae in such a volatile market entails too much risk.
I am pleased to see that Invitae is making progress in lowering its expenditure of cash. Despite this, there is still a chance that the business won’t be able to pay its bills if it doesn’t issue shares that dilute the company’s stock.
The fact that the business has not yet turned a profit is even more concerning to me. In light of the current state of the market, that is a major red flag.
If Invitae were achieving explosive sales growth, we might be able to forgive it for its low profitability. However, that is not the situation. Invitae’s revenue increased only 16.7% year over year in the third quarter. For the entire year 2022, the business anticipates only modest revenue growth in the double digits. That’s not bad, but it’s not strong enough to get investors excited about the stock.
Even though investors shouldn’t try to time the market, they should still consider the current trends when choosing which stocks to buy and when. For Invitae, I don’t think the time is right.
Bear or bull?
Which one is more convincing? It probably depends on how much you can handle risk and how long you want to wait.
The market for DNA testing may have enormous potential for expansion. For instance, some estimates place the market penetration of hereditary cancer testing at only 10% to 20% of potential patients. Over time, Invitae could be one of the biggest winners in this market. On the other hand, it might continue to be a stock with a lot of swings in the near future.