Shares of Invitae Corporation (NVTA 11.57%) closed 11.57% higher on Friday after Cathie Wood, the CEO of Ark Invest, said the stock was undervalued. Wood’s Ark Innovation ETF owns more than 18 million shares of Invitae, worth roughly $24 million as of Friday, so her company has a huge stake in the stock, which has declined more than 74% over the past year and more than 27% so far this year.
Invitae specializes in genetic testing to improve healthcare outcomes. The company finished 2022 with improved revenue, but it had huge losses. The company reported 2022 revenue of $516.3 million, up 12.1%. However, it lost $3.1 billion, or $13.18 in earnings per share (EPS), compared to a loss of $379 million and an EPS loss of $1.80 in 2021. The company also has around $1.6 billion in net debt, so that’s a big concern.
The company has begun cost-cutting measures. In the fourth-quarter earnings call, Chief Financial Officer Roxie Wen said the company expects to reduce its cash burn in 2023 to $250 to 275 million in 2023, a more than 45% reduction from the nearly $510 million in cash burn the company had in 2022. Still, the stock presents a lot of risk to investors, with its large debt load. The company did show some progress in the fourth quarter, with its net loss being $99.8 million, compared to a $205 million loss in the same period last year. In the long run, genetic testing has plenty of growth potential. A report by Grand View Research estimates the genetic testing market at $8.8 billion in 2023. It is expected to have a compound annual growth rate of 22% between now and 2030, reaching a $35.34 billion market by that time. The question will be whether Invitae will be around for that growth.
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.