Why Quanterix Stock Came Crashing Down

Ergo, if Quanterix isn’t selling more machines, they won’t be selling more consumables, and the appeal of the company dissipates. And that’s where we seem to be sitting today.

Always be able to state your investment thesis very simply. It’s called an elevator pitch, because it shouldn’t take longer than 30 seconds to explain in terms so simple a 10-year-old can understand. We invested in Quanterix (QTRX) because they are building machines that help mankind manipulate the workhorses of nature – proteins. Customers buy these machines and then purchase very profitable consumables over time. We find this razor-blade business model to be quite attractive.

From Products to Services

A cursory look at the top line shows that all is well. The company is expecting 11% growth this year and they’ve gotten past the “quality problems” stutter step. However, we still have grave concerns about their platform becoming more dependent on services rather than their deployed instruments. Here’s what we mean:

The biggest problem is the decline in instrument sales (blue bars) over time. Without selling more instruments, consumables revenue can only increase alongside increased machine usage. Customers are only going to use their machines up to a certain limit. Above, we see consumables revenue (orange bars) predictably plateau as fewer new machines come online. The only signs of growth are the services components of the business (grey bars