Shares in genetic testing company GeneDx Holdings (WGS 0.74%) continued their wild ride in 2025 and are up almost 34% on the week to Friday morning. This week's move follows the American Academy of Pediatrics' (AAP) updated guidance, which recommends exome and genetic testing as a first-line test for children with global developmental delays (GDDs) and intellectual disabilities (IDs).

That's good news for GeneDx because it has these tests. Additionally, it could encourage the increased adoption of genetic testing to identify rare diseases for which GeneDx has a large dataset.

What does the report recommend?

Digging into the details of the updated guidance, the report states that "Pursuing genetic diagnosis for GDD/ID allows for accurate prognostication, facilitates surveillance for potential disorder-related complications, provides accurate recurrence risk in families interested in having additional children, and allows for prenatal diagnostic testing and preimplantation genetic diagnosis (PGD)."

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The report cites research stating that the global prevalence of GDD/ID is 1% to 3%. As such, action taken in response to the updated guidance could move the needle for GeneDx, and it encouraged Jefferies to raise its price target on the stock to $105 from $80.

What it means to investors

The update is good news, but GeneDx remains a speculative investment. There's little doubt that genetic testing has a bright future, but the company faces significant competition in this field. Its principal value lies in its rare disease datasets and analytical capability, but that could arguably get more competitive if rivals with deeper pockets move into the rare disease market and chip away at GeneDx's business moat.