I expect the biggest stock winners in coming years to be in select sectors, such as biotechnology, suggests Michael Murphy, growth stock expert and editor of New World Investor — and a participant in MoneyShow's Accredited Virtual Expo on March 2-4. Register for free here.
The drive to produce, innovate and cure is so strong in biotech, especially in the smaller drug companies, that knocking one out of the park is not only possible but probable. My current recommendations focus on finding the next big winners and companies that will offer solid profits from effective drugs.
Invitae (NVTA) reported a strong December quarter, with revenues up 51.5% from last year to $100.43 million and a pro forma loss of 63¢ a share. Revenues roared back from the virus-related drop.
Billable volume was 151,000 in the March quarter, 113,000 in the June period as the lockdowns hit, and 157,000 in the September quarter. It hit a record 238,000 samples in the fourth quarter. 188,000 of that was Invitae’s legacy business and 50,000 was from ArcherDX.
The cost to process a sample is back to the lows of 2019. This will vary with the mix of tests, but Invitae expects to drive it lower over time.
Their pro-forma gross profit margin was 45% in the quarter. They are targeting 50% in 2021. On the conference call they reiterated their guidance outlook for 50% – 60% annual revenue growth over the next few years and expects over 60% revenue growth this year to over $450 million.
The primary risks are that a competitor starts taking significant market share. An additional risk is the probable timing of the next financing.
The company finished the quarter with $360.7 million in cash and then raised a whopping $434 million in January. The total of $795 million means NVTA is unstoppable.
When we bought this stock back in January of 2018, we were speculating that it would become the Amazon of genetic testing, the winner-take-most in a huge global market.
Over the next five years that will steadily become obvious to everyone. Buy NVTA under $50 for a first target of $100 and eventually higher levels when they become the Amazon of genetic testing.
