Invitae (NVTA) Stock Forecast Looks Solid Before Its Q1 Earnings

Invitae (NVTA) is scheduled to report its financial results for the first quarter of 2021 on May 4 after the markets close. What can investors expect from Invitae’s earnings report? Should you buy NVTA stock before the first-quarter earnings release?

Genetic testing, one of Invitae's key business components, has steadily delivered a robust performance over the past few years. The trend will likely continue in 2021.

In the first quarter, Wall Street analysts expect Invitae to post sales of $101.5 million, which would be 58 percent higher than $64.3 million in sales in the first quarter of 2020. Analysts also expect Invitae to post an adjusted EPS of -$0.61 in the first quarter compared to -$0.80 in the same quarter a year ago. In the fourth quarter of 2020, the company reported an adjusted EPS of -$0.63 on sales of $100.4 million.

Invitae stock has been in a free-fall after peaking in the first quarter of 2021. The stock is down 19 percent YTD and 45 percent from its 52-week highs. However, the stock has nearly doubled investors’ money over the last 12 months.

Invitae has become a favorite stock of ARK Investment Management’s CEO Cathie Wood. Invitae was one of Wood's most underappreciated holdings. The stock is included in the ARK Innovation ETF (ARKK) and the ARK Genomic Revolution ETF (ARKG). Invitae has a weightage of 2.15 percent in the ARKK ETF and 1.83 percent in the ARKG ETF.

ARK Invest owns about 19.3 million shares of Invitae. That is worth about $674 million, which is huge, considering the genetic testing company only has a market capitalization of about $6.7 billion.

Invitae generated revenue of $279.6 million in 2020. The company expects its revenue to rise 61 percent YoY to $450 million in 2021. Invitae is trading at 2021 and 2022 price-to-sales multiples of 14.9x and 10.1x, respectively.

Invitae’s competitor 23andMe plans to go public through a reverse merger with VG Acquisition Corp. (VGAC) SPAC at an equity valuation of $4.4 billion. Meanwhile, at VGAC’s current stock price, 23andMe is valued at around $4.5 billion. The company forecasts sales of $218 million in 2021, $256 million in 2022, and $400 million in 2024. These figures would mean 2021, 2022, and 2024 price-to-sales multiples of 20.6x, 17.6x, and 11.2x, respectively.

According to estimates compiled by Market Beat, analysts' consensus target price is $49.33 for Invitae stock, which is 43.7 percent above its current price. Among the seven analysts tracking Invitae, four recommend a buy, while three recommend a hold. None of the analysts recommend a sell. The highest target price of $65 is 89.3 percent above the stock's current price, while the lowest target price of $35 is 2 percent above the stock's current price.

Invitae stock looks like a good buy now based on the company's growth outlook and attractive valuation. At almost 45 percent below its 52-week high, the stock offers investors exposure to the genetic testing company at a bargain. The total addressable market size for the company is $154 billion globally.