Just listened to the call on my drive to work. No time to post a review, anyone have time?
Seems like we’ve got a special company here.
Long
Ok. I was very excited about this company. Then, as I began to do more research, I came to the conclusion that there will probably lots of competition in this space. Though, GH to me has a clear head start.
ER comes out and I conclude that it is a disaster for a stock trading 80 P/S. Why? Revenues slowing. Revenues grew 82% for year, only 64% in 4th quarter. Guidance seemed down right miserable-35-40% from memory. Stock was up 10%. I figure huge crash coming. Well…today I sell up 13% and it has moved another 5% since. I fell asleep last night listening to cc. So, clearly I have listen again. Don’t know what I am missing…something.
3 Likes
Ok. I was very excited about this company. Then, as I began to do more research, I came to the conclusion that there will probably lots of competition in this space. Though, GH to me has a clear head start.
ER comes out and I conclude that it is a disaster for a stock trading 80 P/S. Why? Revenues slowing. Revenues grew 82% for year, only 64% in 4th quarter. Guidance seemed down right miserable-35-40% from memory. Stock was up 10%. I figure huge crash coming. Well…today I sell up 13% and it has moved another 5% since. I fell asleep last night listening to cc. So, clearly I have listen again. Don’t know what I am missing…something.
You aren’t missing anything. It’s a great company and it is growing rapidly. But it is priced at a beyond stratospheric level with years of hyper growth already priced in. So it is extremely risky. I’ve been burned so many times by biotech stocks that I just stay away. It may be rising now purely on momentum. Who knows what it’s worth? Who knows what other competition may arise, product glitches or other unknowns might slow growth? I’ve seen stocks like this soar and then crash just as spectacularly so the price today may be unhinged from its real value. It’s like a lottery ticket - I wouldn’t bet any money you can’t afford to lose.
dave
8 Likes
Or it could be the real deal, saving time (which for an otherwise-terminal patient might have some pretty high returns) and allowing for more pinpointed cancer treatment.
Not saying its overpriced or not, and happy to keep harvesting the gains (currently 108067.76% annualized!!!), but it could very well be a long-term winner, too.
I seem to recall Saul sold out just before earnings, so there’s that, too. But dang, that +25% in one day…
Correction: Saul sold all of his DOCU and added to GH recently, so yeah… his prescience is real.
2 Likes
And like a winning lotto ticket, one can use the winnings to buy new tickets, keep the cash or anything in between. I’ve decided that I’m divided enough that I’ll sell the gains so far.
I know it is basically the same as the “house’s money” fallacy. However, because the risk/reward profile hasn’t changed significantly, I’m still willing to risk the amount of the original investment, but not the amount that it has become.
Now for something useful, RB subscribers should read: https://www.fool.com/1069/coverage/updates/2019/03/13/guarda…
It’s paid content, so I won’t post anything beyond the link, but the URL provides a free BLUF summary.
ER comes out and I conclude that it is a disaster for a stock trading 80 P/S. Why? Revenues slowing. Revenues grew 82% for year, only 64% in 4th quarter…Don’t know what I am missing…something.
Hi Treepak,
What you are missing is what this company is all about. It has nothing to do with current revenue. That’s just a little sideshow, a taste of the future. They have a first mover lock on a simple blood draw biopsy, instead of a surgical biopsy of the lung or the intestine or whatever. In five years or less there won’t be any more surgical biopsies.
They are already approved by Medicare and Blue Cross Blue Shield and Cigna, and others, for reimbursement even though they haven’t yet been approved by the FDA. Why? You figure it out. A blood draw which is much cheaper and with much fewer complications. If you were an insurance company, wouldn’t you go for it. And their big Nile study showed that they picked up all 77 of the cases that surgical biopsies found, and 11 more to boot. That’s why the price is up 125% in a month. It’s all over but the shouting.
Saul
28 Likes
ER comes out and I conclude that it is a disaster for a stock trading 80 P/S. Why? Revenues slowing. Revenues grew 82% for year, only 64% in 4th quarter. Guidance seemed down right miserable-35-40% from memory.
The revenue growth rate slowed because the company earns revenue in two ways: Precision oncology testing (what we really care about) and development services (money earn from pharma partners when trials start and end which is lumpy by nature).
Precision oncology testing revenue grew 98% this quarter. That’s a darn good sign.
Development services revenue dropped 19%. Why? Here’s what management said on the call:
“Development services revenue in the fourth quarter totaled $4.8 million, down 18% from the prior year quarter, which included $5.1 million of revenue recognized from completion of the laboratory development project in 2017. Development services revenue from biopharmaceutical customers is subject to quarter-to-quarter variability as drug discovery and development programs start and complete.”
This explains why total revenue was only up 64% from the quarter.
If you look at all of 2018, development services revenue grew 58% to $12.2 million.
Guidance is 43% to 49% revenue growth in 2019. This was significantly above what Wall Street expected, even if it doesn’t seem all that impressive for a company with such a high P/S.
Guardant is a newly public company, so we don’t know if management has “beat and raise” built into its DNA just yet…but last quarter the company called for full-year 2018 revenue to land between $82 million to $84 million. They actually delivered $90.6 million.
Could the 43% to 49% projected revenue growth prove to be super conservative so they can beat and raise each quarter going forward? It is possible.
However, there’s NO DOUBT that shares are crazy expensive. 59X the high end of 2019 sales guidance.
The TAM here is huge, so you kinda have to look at GH like any biotech that is in the early stages of its launch. The P/S ratio could shrink really fast if LUNAR-1 and LUNAR-2 show that using Guardant’s technology for cancer screening makes sense. If that happens then revenue will explode.
It is a risky, high-priced stock for sure…but for a good reason.
Brian
8 Likes