Why Guardant Health Stock Is Crashing Today

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What happened

Shares of Guardant Health (GH 2.29%) were trading 23.4% lower as of 11:51 a.m. ET on Friday. The steep decline came after the company announced its first-quarter results following the market close on Thursday.

The medical testing specialist reported Q1 revenue of $96.1 million, up 22% year over year. This result was in line with Wall Street estimates. It posted a Q1 net loss of $123.2 million, or $1.21 per share, based on generally accepted accounting principles (GAAP). This result was worse than its GAAP net loss of $1.09 per share in the prior-year period. However, it too was in line with analysts’ consensus estimate.

Guardant Health also reaffirmed its guidance for 2022. The company still expects revenue in the range of $460 million to $470 million. At the midpoint, that would amount to an increase of 24.5% from 2021.

So what

Friday morning’s sell-off might seem overdone considering that Guardant Health’s first-quarter numbers met analysts’ estimates. The problem for the company is that merely meeting expectations was not enough considering the premium valuation the stock was trading at prior to the report.

Guardant Health’s shares are now down more than 70% from the 52-week high. However, it still trades at nearly 17 times sales.

But the company’s long-term prospects still appear to be quite good. It continues to pick up additional approvals and positive reimbursement decisions for its Guardant360 CDx companion diagnostic product. It also recently launched Shield, a laboratory-developed blood test that detects early-stage colorectal cancer.

A physician pointing to an icon showing DNA next to other healthcare-related icons.

Image source: Getty Images.

Now what

The company has a larger-scale study of its Shield product still underway, and expects to report the results from that trial, dubbed ECLIPSE, in the second half of 2022. Guardant Health co-founder and co-CEO AmirAli Talasaz stated that if these results are close to the validation performance for the laboratory-developed test, the company believes that Shield will become the leading non-invasive test for colorectal cancer.