Investors hammered GeneDx stock on Wednesday after the diagnostics company beat first-quarter expectations — but not by enough.
GeneDx is well known for its whole genome and exome sequencing technology. Its platform helps screen patients' DNA for genetic diseases.
During the March quarter, GeneDx brought in $87.1 million in sales. But that was only 10% above forecasts for $79.5 million and might not have been enough to satisfy investors used to a 20% top-line beat, Wells Fargo analyst Brandon Couillard told Investor's Business Daily.
Further, test volume declined sequentially for the first time since GeneDx went public. The volume of exome and genome tests grew 24% year over year to 20,562. But that slipped from 20,676 in the fourth quarter.
"You kind of had a stock that was priced for perfection and there were a couple of things to poke at," he said.
GeneDx ranks 27th on the IBD 50 list of elite growth stocks. Shares also landed on the IBD Tech Leaders list.
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GeneDx Shares Run Up Into Report
GeneDx shares had run up for six straight days heading into the report. But the stock ripped 42.9% lower, ending the regular session at 66.85. GeneDx stock successfully broke out of a consolidation with a buy point at 115.60 on Tuesday. But Wednesday's move sent shares below the lower boundary of the base.
Expectations were incredibly high heading into the report, Couillard said.
He noted test volumes tend to be weaker in the first quarter. This year, wildfires on the West Coast and severe storms on the East Coast disrupted test volumes, he said. The same could hold true for CareDx and Exact Sciences, other diagnostics companies reporting this week.
There was also one fewer selling day in the quarter, he said.
Excluding those two items, GeneDx suggested volumes would have increased sequentially, he said.
"I think the magnitude of the sell-off is, perhaps, overdone relative to the issues at hand," he said. "I think the company did a good job of walking through a multitude of new growth drivers that would pull through in the second half of the year."
GeneDx Hikes Its Sales Outlook
GeneDx also beat earnings expectations. On a strict, as-reported basis, GeneDx lost 23 cents a share, narrowing from a 78-cent loss in the same three months last year and beating forecasts by 4 cents.
On an adjusted basis, the company earned 28 cents per share, according to FactSet, walloping views for 6 cents and reversing from a year-earlier loss of 33 cents per share.
The sales beat led GeneDx to raise its guidance for the year. The company now expects $360 million to $375 million in sales, topping Street projections for $358.9 million.
Wells Fargo's Couillard noted the guidance boost includes an expected $3 million to $5 million from Fabric Genomics. GeneDx said earlier this month it would spend up to $51 million to acquire the privately held AI-powered genomic interpretation company. Investors likely wanted to see a bigger guidance hike, he said.
Still, he remains constructive on GeneDx shares.
"I think the fundamental story hasn't changed aside from some weather in the first quarter that is something investors may look through as they digest the report," he said.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
