Guardant Health: Bright Future For Liquid Biopsy Leader, But Valuation Is Rich

May 02, 2019 2:43 PM ETGuardant Health, Inc. (GH)ARQL20 Comments

Summary

  • Shares have been on quite a run since IPO.
  • The company is developing blood tests for early detection in high-risk populations and recurrence monitoring in cancer survivors.
  • I provide an overview, touch on recent events, and include highlights from a recent conference presentation.
  • A premium valuation is merited, considering impressive growth, wealth of supportive data, important collaborations, and large addressable market.
  • A pilot position here is appropriate for long-term investors. For my purposes in ROTY, I'd require a cheaper valuation before considering.
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Shares of Guardant Health (NASDAQ:GH) have been on quite a run since its IPO priced at $19 in October of last year. In fact, in just a few short months, the stock was a five bagger at one point in March.

The leader in liquid biopsy testing was identified by multiple ROTY members as an intriguing story worth paying attention to and potentially purchasing a stake in. However, when I looked a couple of months ago, I wasn't willing to consider Guardant for ROTY due to an exorbitant valuation (no matter how much I love a story, I need to get in at a valuation that makes sense).

Now that the stock has pulled back significantly, I'm willing to take a closer look to determine if there's a near to medium term opportunity for us to take advantage of.

Chart

Figure 1: GH daily advanced chart (Source: Finviz)

Figure 2: GH 15-minute chart (Source: Finviz)

When looking at charts, clarity often comes from taking a look at distinct time frames in order to determine important technical levels to get a feel for what's going on. In the first chart (daily advanced), we can see healthy price action from the get-go after IPO (consolidation in $30 range, run up to $100, pullback to mid-60s). It's worth noting the stock is still trading well above its 20-day moving average. In the second chart (15-minute), we can see stock continues to consolidate (remains to be seen whether near term there's further downside).

Overview

Guardant Health was formed in 2013 with the audacious goal of conquering cancer with data and being a leader in the space of liquid biopsy testing. Management believes that health care is "data starved" and that if this data could be unlocked the end result would be improving outcomes for patients.

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This article was written by

Jonathan Faison profile picture
16.53K Followers
Community of Biotech Investors Focused on Value & Clinical Momentum

Founder of ROTY Biotech Community (500+ members). Big believer in quality over quantity, my goal is to add value for ALL readers.





Disclosure: I am/we are long ARQL. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Disclaimer: Commentary presented is NOT individualized investment advice. Opinions offered here are NOT personalized recommendations. Readers are expected to do their own due diligence or consult an investment professional if needed prior to making trades. Strategies discussed should not be mistaken for recommendations, and past performance may not be indicative of future results. Although I do my best to present factual research, I do not in any way guarantee the accuracy of the information I post. I reserve the right to make investment decisions on behalf of myself and affiliates regarding any security without notification except where it is required by law. Keep in mind that any opinion or position disclosed on this platform is subject to change at any moment as the thesis evolves. Investing in common stock can result in partial or total loss of capital. In other words, readers are expected to form their own trading plan, do their own research and take responsibility for their own actions. If they are not able or willing to do so, better to buy index funds or find a thoroughly vetted fee-only financial advisor to handle your account.

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