By Tyler Prahm (University of Nevada, Reno) and Marin Hubert (McGill University)
Stock Name: Invitae Corporation
Ticker: NYSE: NVTA
Timeline: 2-3 weeks
Invitae Corporation is a medical genetics company that analyzes information related to genetic diagnostics, preimplantation, inherited disorders, miscarriage analysis, and hereditary cancer. Their mission is to bring comprehensive genetics into mainstream medicine to improve healthcare.
The company is headquartered in San Francisco and their primary customer-base is located in California. Their main source of revenue are patients with insurance carriers. It offers a tool kit for clients to collect a sample of saliva and send it back to their laboratories for analysis.
In the third quarter of 2020, Invitae accessioned close to 170,000 samples and kept their average cost per sample constant at $274. This resulted in an increase in revenue to $68.7 million on Q3 2020 compared to the $56.5 million posted for Q3 2019. This increase was mainly caused by a 35% increase in revenue coming from institutions (hospitals, clinics), and a 40% increase in revenue coming from patients who pay directly.
In September 30th, 2020, Invitae’s cash totalled $368 million, showing a net decrease in cash and cash equivalents of $61.4 million over the quarter. This is mainly due to the acquisition of ArcherDX through an equity and debt financing package. With this acquisition, they aim to create a global leader in comprehensive cancer genetics and precision oncology. Archer DX is a leading genomic analysis company specializing in cancer research.
Over the course of 2020, Invitae also acquired 100% of the equity interest of Diploid in an effort to use artificial intelligence to screen genetic disorders. Diploid is the company that developed Moon, an artificial intelligence (A.I.) software capable of diagnosing genetic disorders in minutes based on next-generation sequencing data and patient information.
Product Offerings Snapshot
Invitae Corporation offers genetic tests through saliva collection kits. For example, a client will connect with an independent genetic counselor or doctor in order to determine the appropriate test. Once received, the client will collect the saliva sample and send back the kit to Invitae’s laboratories leaving the genetic experts to interpret the results. This process generally lasts from ten to twenty-one days. They offer three different tests to their clients: diagnostic tests, in order to discover or understand inherited diseases, proactive tests, to learn if you are more likely to develop certain conditions, and reproductive tests, which will give the client helpful information to guide health decisions before, during and after pregnancy.
Sector and Industry Overview
Weightage in ETF: 3.72% Index Comparison Analysis Graph 1: Invitae Corporation compared to ARK Genomic Revolution ETF (Tradingview.com as of December 21, 2020)
Although Invitae Corporation is part of the Russell 2000 index, it can also be compared to the ARK Genomic Revolution ETF (ARKG), where NVTA holds a high 3.72% weightage. When comparing NVTA (purple) to ARKG (blue), both appear to grow hand-in-hand until the middle of december. At that time, a large sell-off from insiders of Invitae Corp took place, potentially explaining such selling pressure compared to the ARKG which saw sideways movement in its price. Since then, both NVTA and ARKG have been increasing significantly.
Moving Averages Analysis
Graph 2: ARK Genomic Revolution ETF with simple moving averages (Tradingview.com as of December 21, 2020)
Dating back to October, ARKG has consistently traveled on an uptrend above the moving averages for the majority of the listed period. Only during a brief period of time, ARKG broke below each of its 10dMA (labeled in red), 25dMA (labeled in green), and its 50dMA (labeled in blue). Once it broke each of the moving averages, the stock bounced down to the $65 support level. Since then, ARKG managed to force upward momentum and create higher lows reaching its current state at $94.64. If the 10dMA continues to stay above the 25dMA, ARKG will most likely continue its uptrend until there is a clear crossover.
Support and Resistance Analysis
Graph 3: ARK Genomic Revolution ETF with recent support and resistance levels (Tradingview.com as of December 21, 2020)
When looking at Graph 3, the past month posts an overall uptrend on ARKG. Within that trend, some consolidation was observed between the $93 support and the $100 resistance. ARKG tested that resistance level on the fourteenth of December before breaking out on the twenty-first. Since then, this strong resistance has been acting as a support for the stock. Currently, the price of ARKG is sitting at $105.53, and is ready to continue testing the new $106 resistance level. As the stock is at its all-time highs, there is sign of future resistance levels if the stock breaks out in the coming days. However, one could consider the round number levels such as $110 to be the next consolidation levels as similar patterns were observed in the past for ARKG.
Trend and Pattern Analysis
Graph 4: ARK Genomic Revolution ETF with regression channel (Tradingview.com as of December 21, 2020)
Dating back to June of this year, there is a clear channel leading up to the beginning of December. The candlesticks between this channel follow between both the support and resistance 94.9% of the time. In 5.1% of the instances listed, the channel was broken. During the uptrend of the channel, there were no identifiably specific outbreaks that proposed a reversal on ARKG. Rather, the stock consistently remained between the support and resistance boundaries. In the beginning of December, ARKG broke out into a significant uptrend. This uptrend continues to hold bullish momentum and will most likely conclude the regression channel’s trend.
RSI and Stochastic Analysis
Graph 5: ARK Genomic Revolution ETF with RSI and Stochastic analysis (Tradingview.com as of December 21, 2020)
Looking at the Stochastic Oscillator (middle chart), the 3dMA (orange) the oscillator value (blue) is above the 3dMA (orange). Any crossover between the 3dMA and the oscillator would indicate a reversal. Given the current trend of the oscillator, it appears to be en-route for an uptrend. There is no visible reversal for the Stochastic Oscillator. However, the RSI (bottom chart) lists otherwise. On the RSI, the chart is considered overbought (above the value of 70) and may experience a downtrend in the near future. The RSI is yet to cross significantly above the overbought zone and may still have room to do so. If the stock continues to rise, there’s no doubt that the oscillator and the RSI will follow along and become overbought.
Macro-Level Trend Analysis
Graph 6: The comparison between Invitae Corporation, ARKG, NeoGenomics, and Guardan Health Inc. (Tradingview.com as of December 21, 2020)
The two direct competitors of Invitae considered for this analysis are NeoGenomics (NEO) and Guardan Health Inc (GH). We can see on Graph 6 that NVTA’s price action has been correlated to ARKG and its competitors since the beginning of November. However, the price patterns of NVTA, GH, NEO, and ARKG diverged during the third week of December as Invitae Corporation stock experienced a strong downward correction. It is said that this correction results from the news that insiders were selling their shares, as we mentioned above. There are a lot of different reasons for insiders to sell their shares other than a bad future outlook for the company, such as the need for liquidity for example. This decrease in price is not justified by fundamentals, nor the technicals of the company, and one could expect strong upward potential for NVTA as soon as there is more investor confidence towards Invitae Corporation’s ability to grow in the coming years.
Technical Outlook for the Stock
Support and Resistance Analysis
Graph 7: Invitae Corporation with recent support and resistance levels (Tradingview.com as of December 21, 2020)
By looking at the 2M price chart for NVTA, we can identify key levels of support and resistance. Through November and the start of December, NVTA broke these levels thanks to a strong rally towards companies engaging in gene therapy. In other words, after having tested the $52.5 resistance several times, the stock finally broke out. However, as mentioned earlier, the insiders sell-off in the midst of December left some investors fearful and a correction in the price was observed after the stock hit a $61.59 all-time high. The stock bounced back on the previously observed $46 support level and increased above the $52.5 resistance line, which is now acting as a strong support for the coming days. The immediate resistance level that investors will have to pay attention to is the $54.2 level.
Graph 8: Invitae Corporation with Fibonacci levels (Tradingview.com as of December 21, 2020)
The strength of the Fibonacci levels can be confirmed for key levels of support at the 0.236, 0.382 and 0.500 retracement levels. The clearest level of support identified above for NVTA is currently located around the $46 level. Thanks to the pullbacks observed on NVTA, the Fibonacci retracements are accurate in their description of the immediate support and resistance levels and confirm our previous analysis.
Trend and Pattern Analysis
Graph 9: Invitae Corporation with trend and pattern analysis (Tradingview.com as of December 21, 2020)
Since July of this year, NVTA has continued to follow a bullish uptrend inside of a channel. Within this channel, the candlesticks maintain to bounce between the support and resistance levels 88.9% of the time. There was only one instance in the beginning of October where NVTA managed to force a false breakout of the trend. The false breakout is identified from its bullish gap-ups on for a 5D period. These green candles were then broken down from a continuation of a downtrend back into the channel to continue its upward-momentum.
Graph 10: Invitae Corporation forecasted price change (Toggle.ai as of December 21, 2020)