What Happened?
Shares of diagnostics company Guardant Health (NASDAQ: GH) jumped 6.1% in the morning session after its stock hit a 52-week high following recent U.S. Food and Drug Administration (FDA) approval for its Guardant360 CDx liquid biopsy test.
The test, which analyzes blood samples for signs of cancer, was approved as a companion diagnostic for a specific type of lung cancer. This approval for the largest liquid biopsy panel of its kind spurred positive reactions from analysts, with Mizuho raising its price target to $175 and RBC Capital initiating coverage with an Outperform rating. The positive market sentiment reflects growing investor confidence in the company's future prospects, as evidenced by its 39.6% revenue growth.
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What Is The Market Telling Us
Guardant Health’s shares are very volatile and have had 26 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 8 months ago when the stock dropped 8.8% on the news that the company announced the pricing of an upsized convertible senior notes offering and a public stock offering, raising concerns about dilution for existing shareholders.
The company priced $350 million of convertible senior notes, an increase from the previously announced $300 million offering. Concurrently, Guardant Health priced a public offering of more than 3.3 million shares of its common stock at $90.00 per share. Such financial moves, while raising capital for the company, often lead to a drop in stock price. This is because the issuance of new shares and securities that can be converted into shares can dilute the ownership stake of current investors, making each existing share represent a smaller piece of the company.
Guardant Health is up 36.3% since the beginning of the year, and at $138.68 per share, it has set a new 52-week high. Investors who bought $1,000 worth of Guardant Health’s shares 5 years ago would now be looking at an investment worth $1,102.
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