PSNL - This Biotech Leans on 1 Customer for 56% of Revenue but There's a Catch
Investors should be cautious when a business relies too heavily on a single customer. If the relationship changes or ends, then it's usually not very fun to be a shareholder. It can take years for the company and stock to recover -- if a recovery can be achieved at all.
That's what makes the high concentration of revenue at Personalis (NASDAQ: PSNL) so potentially worrisome. The company leaned on its top customer for 56% of revenue in the first half of 2019. The top two customers generated 76% of revenue in that span.
While the risk cannot be overlooked under any circumstance or explanation, a little nuance can go a long way. As it turns out, the company's top customer is the U.S. Department of Veterans Affairs, and the long-standing relationship has allowed Personalis to hone its technology platform in the up-and-coming field of whole genome sequencing. Can it leverage the relationship to extend its commercial capabilities and diversify revenue in the long run?