Key Points
Shares of GeneDx Holdings (NASDAQ: WGS) were plunging 42.9% as of 11:21 a.m. ET on Wednesday. The steep decline came after the genetic diagnostics company announced its 2025 first-quarter earnings before the market opened.
GeneDx reported Q1 revenue of $87.1 million, up 42% year over year. This result was well above the consensus Wall Street forecast of $79.5 million.
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What about GeneDx's bottom line? The company posted a Q1 net loss of $6.5 million based on generally accepted accounting principles ( GAAP ). However, its adjusted net earnings for the quarter were $7.7 million, or $0.27 per share. The average analysts' estimate projected adjusted earnings per share of $0.09.
What were the concerns with GeneDx's Q1 update?
It's unusual for a stock to decline as much as GeneDx has today after topping Wall Street's revenue and earnings estimates. So what were the concerns with the company's Q1 update?
For one thing, investors have become accustomed to GeneDx beating revenue estimates by a much wider margin in the past. A revenue beat of less than 10% was likely disappointing to many. Also, GeneDx's test volume declined quarter over quarter for the first time since the company's initial public offering in 2020.
Is GeneDx stock a buy on the sell-off?
Today's sell-off appears to be overdone. GeneDx's Q1 year-over-year comparisons suffered because this Q1 had one fewer business day than the prior-year period. Importantly, the company raised its full-year revenue guidance to between $360 million and $375 million from the previous range of $350 million to $360 million.
The upper end of GeneDx's revenue outlook reflects a forward price-to-sales ratio of roughly 5.4. This looks expensive relative to the life sciences tools and services industry's forward multiple of around 4.8. Some aggressive investors might find GeneDx stock appealing after the big plunge. However, I think other stocks offer a better risk-reward proposition.
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