Why Is Natera (NTRA) Stock Up Today?

Shares of Natera (NASDAQ:NTRA) plunged lower by as much as 40% yesterday after Hindenburg Research released a short report on the company. The report alleged that Natera engaged in several fraudulent practices concerning management and billing practices. However, shares of NTRA stock are up more than 20% today after the company released an official response to the claims. Natera CFO Mike Brophy hosted an analyst call this morning in response to the claims as well. 

a visualization of DNA in a vial
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Why Is NTRA Stock Up Today?

In its response, Natera disagrees “with the accuracy of this report.” The clinical genetic testing company also notes that Hindenburg is currently under investigation by the Department of Justice for “illegal trading tactics.” Furthermore, Natera claims that the material in Hindenburg’s report is the “same story short sellers have been pitching for many years.”

Hindenburg alleges that Natera misused prior authorization requirements via My Genome My Life (MGML). However, Natera points out that MGML is “neither owned, operated nor controlled by Natera.” In addition, Natera states that most clinical laboratories utilize prior authorization services to “ensure patients get access to needed testing.”

Natera also touted the validity of its tests in its response. The Texas-based company explained that its tests have been the subject of “over 100 peer-reviewed publications.” On top of that, the company performed over 1.5 million tests last year. Out of the 1.5 million, only 82 patients shared negative comments with the Better Business Bureau (BBB). Natera also pointed out that it has an A+ rating on the BBB website.

Despite the A+ rating, Natera did not disclose that it is not BBB accredited. Additionally, Natera did not disclose that it has an average rating of 1.1 stars out of 5. This rating comes from 139 customer reviews. Furthermore, the BBB website states that “Customer Reviews are not used in the calculation of BBB Rating.” As a result, the BBB rating has nothing to do with Natera’s flurry of poor customer reviews.

Wall Street Analysts Defend Natera

Several analysts released statements defending Natera following the release of the short report. Morgan Stanley analyst Tejas Savant believes concerns from the short report are “overblown,” and that it has created a buying opportunity. Savant maintains her “overweight” rating and price target of $110.

Baird analyst Catherine Schulte believes NTRA stock has presented a buying opportunity as well. However, she acknowledged that “patient/healthcare system impact aside, billing probes are bad and create overhangs for stocks.” Schulte has an “outperform” rating and a price target of $100.

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.


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