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Veracyte: Not Too Excited After Momentum Run

Mar. 01, 2021 6:42 AM ETVeracyte, Inc. (VCYT)3 Comments


  • Veracyte has a huge momentum run in 2021 thanks to accelerating operating and stock market momentum.
  • I like the secular growth potential, yet fear that investors have gotten a bit too enthusiastic.
  • The company is active in dealmaking and collaborations, and if shares fall a little further, I am happy to initiate a small position.
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Veracyte (NASDAQ:VCYT) has seen incredible momentum in spite, or better said, despite the pandemic. This was a less than $10 stock up to 2018. The pandemic and accelerating operating momentum and interest from investors have resulted in quite some enthusiasm.

Trip Down Memory Lane

When Veracyte went public in 2013, shares were trading at $13 and change on their opening day of trading. I concluded that shares looked interesting and might be worth a small allocation.

The company presented itself as a diagnostic company and a pioneer in molecular cytology. The company typically targets diseases which require invasive procedures and accurate diagnoses. The premise is that healthy patients undergo costly interventions which often turn out to be unnecessary.

By having an early diagnosis, actionable genomic information can be derived from cytology samples, basically the promise of Veracyte. This is done with Affirma which was launched in 2011 and, in the two years up to the public offering, already obtained coverage from large insurers like Aetna, Humana, and UnitedHealthcare.

The company generated $2.6 million in sales in 2011, a number which rose to nearly $12 million in 2012 and was set to run at a rate in the low $20 million in 2013, the year of the offering. Important to stress that this was just a small cap at the time, with shares trading at $13 and change, resulting in a $180 million equity valuation.

What Happened?

Since the public offering, the company has steadily grown its operations. 2013 sales came in at $22 million. Sales nearly doubled again to $38 million in 2014 as the company continued to lose some money. Losses and dilution meant that the share count continued to rise, something to be aware of.

Fast forwarding to early 2019, the 2018 results revealed that sales rose to $92 million, with

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This article was written by

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Finding value that gets unlocked in M&A, IPOs and other corporate events
The writer is a long term value investor and M.Sc graduate in Financial Markets with over 10 years experience. Value can be found in both long and short ideas and uses options to enhance the risk-return profile of investment ideas. Disclaimer: This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice.

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