Natera Stock Analysis: Why This Cancer Testing Stock Could Triple

Let’s start with something remarkable. Natera (NASDAQ: NTRA) just celebrated its 10th anniversary as a public company, and what a journey it’s been. The stock has delivered nearly 10x returns, climbing from its $18 IPO price to around $170 today. But here’s what makes this even more impressive – revenues have grown equally, expanding 10-fold from $190 million to $2 billion. This is good, but there is something more. Last twelve months revenue growth was a stellar 44%.

But what’s driving this growth? It all comes down to one word: intelligence. Medical intelligence, to be precise. Natera has positioned itself at the cutting edge of molecular diagnostics, particularly for cancer detection and monitoring. Think of them as the detectives of the medical world – they help doctors identify problems at the genomic level before they become life-threatening emergencies. The company focuses on three main areas: women’s health, oncology, and organ health.

Their flagship product, Signatera, is a game-changer. It’s a personalized tumor-informed test that uses a simple blood draw to detect circulating tumor DNA and monitor for molecular residual disease across multiple cancer types, including breast, lung, ovarian, colorectal, and bladder cancers. This isn’t just incremental improvement – this is revolutionary technology that’s changing how oncologists monitor their patients.

But come to think of it, what makes their technology special? The beauty lies in the simplicity and precision. Instead of invasive procedures, patients get a blood draw – what’s called a liquid biopsy. But this isn’t your standard blood test. Natera’s technology can detect tiny fragments of tumor DNA circulating in the bloodstream, giving doctors unprecedented insight into cancer progression and recurrence risk. Beyond Signatera, Natera offers Altera for genomic profiling and Empower for hereditary cancer screening. It’s a comprehensive suite that addresses the entire cancer care continuum.

Before we dive into Natera stock’s specific numbers, let’s acknowledge an important reality. Individual stock investing, especially in high-growth companies like Natera, comes with inherent volatility. While the upside potential is substantial, the ride can be bumpy. That being said, if you seek an upside with less volatility than holding an individual stock, consider the High Quality Portfolio. It has comfortably outperformed its benchmark—a combination of the S&P 500, Russell, and S&P MidCap indexes—and has achieved returns exceeding 91% since its inception. This diversified approach can provide exposure to high-quality growth companies while managing single-stock risk. Now, with that context in mind, let’s examine what makes Natera’s individual story so compelling.

Image by sainathdeshmukh from Pixabay

How Big Could Natera Realistically Become?

Here’s where things get exciting. In the latest quarter, Natera processed over 850,000 tests generating $546.6 million in revenue. Of these tests, 22% were oncology tests – and this segment is growing at 50% year-over-year. This is the engine driving future growth.

But let’s step back and think about the bigger picture here. Cancer recurrence is every survivor’s worst nightmare, traditional monitoring leaves patients in the dark for months, and millions of cancer survivors are living in constant fear between scans. These survivors (close to 19 million in the U.S. alone) desperately need better answers about their cancer status. The growing population of cancer survivors represents a massive, underserved market that will need sophisticated monitoring tools for decades to come.

We think Natera can maintain 25% annual revenue growth over the next few years. That would take revenues from around $1.7 billion last year to approximately $7 billion in 2030 – a 4x increase. For context, they’ve been growing at a 40% average rate over the past three years, so 25% actually isn’t an aggressive projection.

You must be thinking – is there really room for a company this size to keep growing? Absolutely. The cell-free DNA testing market, that encompasses what Natera’s Signatera test actually detects, is expected to nearly double from $11 billion today to around $20 billion within five years ^[1]

Natera isn’t just riding this wave – they’re helping create it. Consider the competitive landscape. Roche leads diagnostics with $16+ billion in revenues, followed by Danaher at $10 billion and Abbott at $9 billion. Natera’s current $2 billion in revenue suggests they’re still in the early innings of their growth story.

The $5 Billion Incremental Revenue Opportunity

The growth opportunity breaks down into several key areas:

1. Oncology Market Expansion ($2-3 billion potential): This is the crown jewel. Signatera could capture a much larger share of the global oncology testing market, which is valued in the tens of billions. Expanding beyond current cancer types and moving into earlier-stage detection represents massive untapped potential.
2. International Scale-Up ($1-2 billion potential): Natera has barely scratched the surface internationally, given that North America accounts for 98% of its revenue. Europe, Asia-Pacific, and Latin America represent enormous opportunities as genetic testing adoption accelerates globally. The company’s technology is ready – it’s just a matter of market penetration.
3. Adjacent Market Entry: Early cancer detection, pharmacogenomics testing, inherited disease screening, and organ transplant monitoring all represent natural extensions of their core technology platform.
4. Volume and Penetration Growth: Even within existing markets, there’s substantial room for growth through deeper physician adoption, expanded insurance coverage, and integration into standard care protocols.

The Path to $500

If you are wondering how does $7 billion in revenue translate to a $500+ stock price – the math is straightforward and compelling. If Natera achieves $7 billion in revenue while maintaining their current price-to-sales multiple of around 13x, the stock could reach approximately $700. Even with some multiple compression – let’s say down to 10x sales as the company matures – you’re still looking at stock prices well above $500.

This assumes no significant equity dilution, which seems reasonable given the company’s strong cash generation potential at scale. Surely, the company is currently loss making, but as revenues continue to expand the company’s margins will turn positive. Natera’s net income margin has been improving gradually from -75% in 2021 to -13% now.

The thing is, building diagnostic market penetration takes time, a bit different from ordering something on Amazon or booking an Uber. So the only way Natera can look like it’s worth $50 billion, $100 billion, or even $200 billion (current market cap around $23 billion), is if investors can look way, way out into the future. Think 2030 (not 2025), with billions of tests processed annually across global markets – the point is not to get stuck in today’s numbers. If you’re concerned about the valuation, look even further out to 2035, when liquid biopsy could be as routine as a cholesterol test!

But obviously, it is not going to be that straightforward, right? so what needs to go right for this scenario to play out? Several key factors will determine success:

• Reimbursement Expansion: Securing broader insurance coverage, particularly for oncology tests, would dramatically expand both addressable market and pricing power.
• Clinical Evidence Generation: Building robust clinical data to support broader test adoption across more indications and patient populations.
• Operational Scaling: The company must maintain gross margins while significantly increasing test volumes through automation and process optimization.
• Technology Leadership: Continuing to innovate in cell-free DNA analysis to maintain competitive advantages and enable new applications.
• Strategic Execution: Whether through organic growth or strategic acquisitions, Natera needs to execute flawlessly across multiple growth vectors simultaneously.

What Could Derail This Optimistic Scenario?

While the opportunity is substantial, several risks could significantly impact Natera’s growth trajectory:

1. Reimbursement Challenges: Healthcare reimbursement is notoriously complex and slow-moving. If insurance companies push back on coverage for Natera’s tests, or if reimbursement rates decline, it could severely constrain market expansion.
2. Competitive Pressure: Larger players like Roche, Abbott, and Danaher have significantly more resources. If they decide to aggressively compete in Natera’s core markets, pricing power and market share could erode quickly. (compare financial strength versus Natera’s peers)
3. Regulatory Hurdles: The FDA and international regulatory bodies could impose new requirements or restrictions that slow product development or market access, particularly for newer applications like early cancer screening.
4. Technology Disruption: While Natera is currently a technology leader, the diagnostics field moves quickly. New technologies or approaches could potentially obsolete their current platform advantages.
5. Market Adoption Speed: The analysis assumes relatively rapid adoption of genetic testing across international markets. If adoption proves slower than expected, revenue growth could disappoint significantly.
6. Economic Sensitivity: In economic downturns, healthcare spending often faces scrutiny. Non-essential testing could see reduced volumes, particularly in markets without strong reimbursement coverage.
7. Market Risk: NTRA stock has a history of underperforming the broader markets during economic downturns (compare Natera’s peers’ returns) While there’s upside, the downside risk is also meaningful.

The Bottom Line

Natera represents a compelling growth story built on genuinely innovative technology addressing massive and expanding markets. This isn’t just a story about financial engineering or market euphoria. This is a company that has fundamentally scaled its business operations while maintaining growth momentum that would make most CEOs envious. The company has demonstrated its ability to execute over the past decade, delivering both revenue growth and stock appreciation.

The path to $500+ per share is mathematically feasible and operationally achievable, but it requires continued excellence across multiple dimensions. For investors willing to take on individual stock risk, this represents a high-growth opportunity with substantial upside potential – balanced against execution and market risks that are very real.

For those seeking a more balanced approach to capturing growth opportunities, the Trefis Reinforced Value (RV) Portfolio offers an interesting alternative. This portfolio has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid- and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.

The question isn’t whether the opportunity exists – it clearly does. The question is whether Natera can continue executing at the level required to capture it, and whether individual investors have the risk tolerance to ride along for what could be a volatile but potentially rewarding journey.

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1. Cell-Free DNA Testing Market Size and Share, Mordor Intelligence [↩]