On Tuesday, Invitae Corp (NYSE:NVTA) shares edged slightly lower after announcing the purchase of health tech company Ciitizen in a cash and stock deal worth $325 million. The company will pay $125 million in cash and issue 7.07 million shares of common stock. It will also issue an additional $225 million in restricted stock units to new employees who want to join Invitae.
Invitae CEO Sean George said in a statement:
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We believe combining Ciitizen’s state-of-the-art, transparent and patient-consented platform with our technologies and services will accelerate our evolution into a genome information company that informs healthcare throughout one’s life.
Invitae will use Ciitizen’s platform to smoothen the process of collecting and organizing health information from various sources. It will then apply machine learning techniques on health information to promote better-care decision making and drive medical research using real-world evidence.
Ciitizen CEO Anil Sethi said:
The combination of lifelong health history together with Invitae’s world-class genetic and data services would enable a digital ecosystem of personalized services for each patient.
Should you buy Invitae shares amid the acquisition?
The purchase of Ciitizen will result in several operational synergies, thereby boosting Invitae’s income potential. As a result, NVTA is an exciting stock for high-growth investors.
However, from a valuation perspective, Invitae shares trade at a steep P/S ratio of 17.35, making the stock less attractive to value investors. Moreover, the company is yet to break even on a trailing 12-month basis, meaning it could be a while before it begins to turn profits.
Therefore, if you are a growth investor, then Invitae could be a good option for your portfolio, given the promising growth of the genome sequencing market.
Invitae faces resistance from the 100-day MA
Technically, Invitae shares seem to have recently rallied towards the 100-day moving average. Moreover, the stock has also risen closer to the overbought conditions of the 14-day RSI. As a result, a short-term pullback could be imminent.
Therefore investors can target potential pullback profits at approximately $27.29 or lower at $23.68. On the other hand, if the stock price breaks above the 100-day MA, it could find resistance at $34.94 and $38.41.
Bottom line: the case for betting on the NVTA pullback in the short-term
In summary, although Invitae shares are down more than 28% this year, the stock has recently spiked to trade closer to overbought conditions. In addition, the NVTA stock price also seems to be facing resistance from the 100-day MA, thereby creating an opportunity for a pullback.
As a result, the stock seems inevitably poised for a short-term pullback despite its exciting growth potential.
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