The shares of Invitae Corporation ( NYSE: NVTA ) fell ~5% pre-market Tuesday after Goldman Sachs downgraded it to Sell from Neutral predicting a long path to profitability for the medical diagnostics company despite its recent efforts at restricting.
While the company’s latest restructuring initiatives were “strategically necessary,” “we see NVTA emerging as a lower growth company engaged in competitive end markets with a long and uncertain path towards profitability,” Goldman Sachs wrote.
The resultant margin profile will make it challenging for the company to bear operating expenditure to reaccelerate growth, the firm added, calling the premium Invitae ( NVTA ) currently trades “unwarranted given their lower growth and longer path to profitability.”
The analysts think the company will struggle to raise capital and will not report positive EBIT until 2028+. “Without sufficient funding, it may be difficult for NVTA to continue to grow revenues at the necessary pace to achieve operating leverage, thus compounding the profitability concerns.”
While Goldman Sachs expects Invitae ( NVTA ) will return to growth in 2024, the firm, issuing a $2 target on the stock, argues that the company’s current trading multiple does not imply this depressed growth outlook.
Seeking Alpha contributor, Bashar Issa has remained bearish on Invitae ( NVTA ), arguing in a recent post: “Any further appreciation in the stock price will likely be met by aggressive share issuance,” given the company’s funding needs.
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Invitae dips as Goldman Sachs cuts to Sell on profitability concerns