Biotech company 10x Genomics (NASDAQ:TXG) reported Q4 CY2024 results beating Wall Street’s revenue expectations, but sales fell by 10.3% year on year to $165 million. On the other hand, the company’s full-year revenue guidance of $620 million at the midpoint came in 1.6% below analysts’ estimates. Its GAAP loss of $0.40 per share was 34.4% below analysts’ consensus estimates.
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10x Genomics (TXG) Q4 CY2024 Highlights:
- Revenue: $165 million vs analyst estimates of $159.5 million (10.3% year-on-year decline, 3.5% beat)
- EPS (GAAP): -$0.40 vs analyst expectations of -$0.30 (34.4% miss)
- Management’s revenue guidance for the upcoming financial year 2025 is $620 million at the midpoint, missing analyst estimates by 1.6% and implying 1.5% growth (vs -0.6% in FY2024)
- Operating Margin: -30.2%, in line with the same quarter last year
- Market Capitalization: $1.43 billion
"In 2024, we launched major new products across all three of our platforms and we made changes to our commercial organization and go-to-market strategy," said Serge Saxonov, Co-founder and CEO of 10x Genomics.
Company Overview
Founded in 2012, 10x Genomics (NASDAQ:TXG) develops single-cell and spatial genomics solutions, enabling researchers to analyze biological systems at high resolution.
Genomics & Sequencing
Genomics and sequencing companies within the life sciences industry provide the technology for increasingly personalized medicine, drug discovery, and disease research. These firms leverage cutting-edge platforms for high-throughput sequencing and genomic analysis, enabling researchers and healthcare providers to better understand genetic underpinnings of diseases. While the industry enjoys high barriers to entry due to proprietary technology and intellectual property, the business model also faces significant R&D costs, reliance on continued innovation, and exposure to shifts in academic, biotech, and clinical research funding. Over the next few years, the subsector is well-positioned to benefit from tailwinds such as increasing adoption of precision medicine, expanded applications for sequencing technologies in areas like oncology and rare disease diagnostics, and growing use of genomic data in drug development. Advances in artificial intelligence could further enhance the speed and accuracy of genomic insights. However, potential headwinds include price sensitivity among research institutions and healthcare systems that are constantly trying to contain and lower costs. Additionally, regulations around data privacy and genomic testing are not yet set in stone, adding uncertainty to the industry.
Sales Growth
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Thankfully, 10x Genomics’s 20% annualized revenue growth over the last five years was impressive. Its growth beat the average healthcare company and shows its offerings resonate with customers.
We at StockStory place the most emphasis on long-term growth, but within healthcare, a half-decade historical view may miss recent innovations or disruptive industry trends. 10x Genomics’s annualized revenue growth of 8.8% over the last two years is below its five-year trend, but we still think the results were respectable. 
We can better understand the company’s revenue dynamics by analyzing its most important segment, Consumables. Over the last two years, 10x Genomics’s Consumables revenue (recurring orders) averaged 6.9% year-on-year growth. This segment has lagged the company’s overall sales.
This quarter, 10x Genomics’s revenue fell by 10.3% year on year to $165 million but beat Wall Street’s estimates by 3.5%.
Looking ahead, sell-side analysts expect revenue to grow 3.1% over the next 12 months, a deceleration versus the last two years. This projection is underwhelming and indicates its products and services will face some demand challenges.
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Operating Margin
Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.
10x Genomics’s high expenses have contributed to an average operating margin of negative 47.9% over the last five years. Unprofitable healthcare companies require extra attention because they could get caught swimming naked when the tide goes out. It’s hard to trust that the business can endure a full cycle.
On the plus side, 10x Genomics’s operating margin rose over the last five years, as its sales growth gave it operating leverage. This performance was mostly driven by its past improvements as the company’s margin was relatively unchanged on two-year basis.
In Q4, 10x Genomics generated a negative 30.2% operating margin. The company's consistent lack of profits raise a flag.
Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
10x Genomics’s earnings losses deepened over the last five years as its EPS dropped 2.4% annually. We tend to steer our readers away from companies with falling EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, 10x Genomics’s low margin of safety could leave its stock price susceptible to large downswings.
In Q4, 10x Genomics reported EPS at negative $0.40, up from negative $0.41 in the same quarter last year. Despite growing year on year, this print missed analysts’ estimates. Over the next 12 months, Wall Street expects 10x Genomics to improve its earnings losses. Analysts forecast its full-year EPS of negative $1.52 will advance to negative $1.24.
Key Takeaways from 10x Genomics’s Q4 Results
We enjoyed seeing 10x Genomics exceed analysts’ revenue expectations this quarter. On the other hand, its EPS missed significantly and its full-year revenue guidance fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock traded down 4.1% to $11.51 immediately after reporting.
10x Genomics didn’t show it’s best hand this quarter, but does that create an opportunity to buy the stock right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.
