Cara Therapeutics stock sinks on larger-than-expected Q4 earnings miss

Yahoo Finance Live anchors Julie Hyman and Jared Blikre discuss fourth-quarter earnings for Cara Therapeutics.

Video transcript

[AUDIO LOGO]

JULIE HYMAN: You know, we tend to get a lot of small biotech companies that trend on our trending ticker page. This is one of them today, Cara Therapeutics. The stock is down after a larger-than-expected miss on estimates, raising concerns on future demand. And the stock is down 26%.

As I say, a lot of these small biotech companies tend to trend. We don't always talk about them. Sometimes I like to grab one and highlight it because the miss here is so acute. Look at the adjusted loss, $0.56 versus $0.34 estimated. And the revenue miss is really dramatic, just over $3 million versus the $14 million that analysts were projecting here.

There seems to be some concern for a kidney-- about a kidney drug that this company makes, that maybe demand isn't all it's cracked up to be.

JARED BLIKRE: Yes. And I'm going to-- I'm going to focus on the charts here. I don't know how to pronounce these drug names embarrassingly, but I have something to say about these charts. This is a three-month chart, and yes, this down candle right here, that big red candle, stands out. But here's a max chart.

This goes all the way back to, what, 2015 or 2014, '13. Anyway, a lot of biotech companies look like this EKG pattern, where they just, kind of, go sideways for the most part over time and then they have these big spike-ups. And that's going to be on some good news with respect to the FDA-- new product, new trial clears, something like that-- and then the inevitable-- not inevitable. But sometimes you get disappointments.

And this repeats. It's, kind of, rinse, wash, repeat for years and years. A lot of biotech companies look like this, and that's why, personally, I stay away from the space. It's not for everybody. If you can manage it, the risk, and you can get into the fundamentals of each company and manage these huge swings, great. Go for it.

But I would prefer to take an ETF exposure--

JULIE HYMAN: Yeah.

JARED BLIKRE: --to the space.

JULIE HYMAN: I mean, it's interesting. Most of the analysts who cover this stock have buy ratings or buy equivalent ratings on it. And I'm just looking at some of the commentary this morning. Piper Sandler saying that the company is-- has "sanguine," quote, unquote, commentary over demand trajectory for that kidney disease drug that I mentioned. But the analyst wonders why it's going to take so long to burn through inventory if the demand is indeed so robust for that particular drug.

Another analyst over at Jefferies said that they'd still be a buyer long term on the valuation and some expansion opportunities for some of their drugs. So we'll see what ends up happening from here. But to your point and to the chart's point, it's a volatile one, as are many of these relatively small biotech stocks.

JARED BLIKRE: Yeah. And we've had a number-- we've had a number of these biotech stocks pop up over the last couple of days.