Natera (NTRA) Scales 52-Week High: What's Driving the Stock?

Shares of Natera, Inc. NTRA reached a 52-week high of $36.52 on Sep 25, closing the session marginally lower at $34.09.

In the past year, shares of Natera have rallied 37.6% against the industry’s fall of 32%. The current level is higher than the S&P 500 index’s rise of 1.6%.

The company, being a major player in providing genetic testing services to healthcare providers and genetic laboratories, is expected to scale new highs in the near term. It has an average positive earnings surprise of 3.4% in the trailing four quarters.

The estimate revision trend for the current year is impressive as well. In the past 60 days, the Zacks Consensus Estimate for the company’s loss per share has improved to $2.10 from $2.17.

Natera currently carries a Zacks Rank #3 (Hold).

Factors Driving Natera

Strong Segmental Growth - The company is likely to sustain the ongoing robust growth momentum on the back of its experience. This upside can be attributed to improvements in ASP and COGS. The company witnesses high revenue growth, courtesy of its development work for BGI Genomics with respect to commercialization of Natera's Signatera molecular residual disease (“MRD”) test in China. The company also undertook the development of reproductive health tests in selected markets on BGI's sequencing instruments using the DNBseq next generation sequencing (“NGS”) technology platform. Broader use of noninvasive prenatal testing (“NIPT”) test is also an impetus.

Product Launch - Management is optimistic about the commercial launch of the Signatera (RUO) platform in China. This was initially launched in the United States in 2017 for research purposes in oncology. Based on the initial success, the market is upbeat about the commercialization of this technology for clinical use as a laboratory developed test (LDT) in 2019.

Strategic Pacts Adding Value - Natera’s newly-inked partnership deal with Foundation Medicine looks impressive. The deal is aimed to develop and commercialize customized circulating tumor DNA monitoring assays that will be used by biopharmaceutical and clinical customers who order Foundation Medicine’s FoundationOne CDx. The companies will share the revenues generated from both sets of customers. Natera is expected to receive about $13 million in upfront licensing fees and prepaid revenues, per the agreement.

The previously declared partnership with QIAGEN has also provided a much-required boost. However, the exact dates for the QIAGEN launch is yet to be declared.

Also, Natera announced the acquisition of its Evercord cord blood and tissue banking business by CBR (a California Cryobank Life Sciences company). This will enable the company to focus on its core genetic testing business in reproductive health, oncology and organ transplantation.

Milestones Achieved by Signatera - The company is upbeat about the progress of Signatera. The company has received Medicare reimbursement for Signatera in patients with local or regionally advanced colorectal cancer. Natera anticipates a response to a formal coverage report to Medicare by late 2019 or early 2020.

Upbeat Revenue Guidance - The company raised yearly revenue guidance in the range of $275-$305 million on steady demand for Signatera. The Zacks Consensus Estimate for current-year revenues of $291.9 million is within this range. This indicates that the company expects to sustain strong momentum through the rest of the year. This also raised investors’ optimism on the stock.

Zacks Rank & Key Picks

Currently, Natera carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the broader medical space are Capricor Therapeutics, Inc CAPR, GW Pharmaceuticals PLC GWPH and Neurotrope, Inc NTRP.

Capricor, carrying a Zacks Rank #2 (Buy), has a projected third-quarter 2019 earnings growth rate of 28.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

GW Pharmaceuticals estimates third-quarter earnings growth rate to be 72.8%. It currently flaunts a Zacks Rank #1.

Neurotrope, with a Zacks Rank #2, has a projected third-quarter earnings growth rate of 27.7%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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