As the coronavirus outbreak spreads to all 50 states, there has been a collective urgency around testing kits. As one of the few companies that are offering such kits, Co-Diagnostics (NASDAQ:CODX) has enjoyed a radical turnaround.
At the start of the year, CODX stock was trading just under $1. But at one point on an intraday basis, shares had skyrocketed over 2,300% for the year.
By anyone’s standard, CODX stock is a rags-to-riches tale. The underlying product is in extreme demand.
Obviously, paranoid people who have flu-like symptoms want to know what their diagnosis is. More importantly, state and federal authorities must identify clusters of COVID-19 cases to mitigate infection rates.
At the same time, the extreme swings over CODX stock represents a liability. After all, nobody wants to hold the bag, especially if the coronavirus is the company’s only viable tailwind.
To this point, the latest data on U.S. coronavirus cases isn’t encouraging for speculators. On March 25, total cases numbered 68,211. Though a sharp uptick nominally, on a percentage basis, the growth rate in total cases has declined noticeably.
Given the latest figures and based on international trends, I anticipate that we’ll see around 200,000 cases on April 4. When you compare that to China’s nominal tally on an apples-to-apples comparison (when both countries first encountered major community spread), it’s not favorable — we’re talking about 76,000 cases in China.
That said, China flattened its infection curve around the time that it hit 70,000 cases. This suggests that, as awful as things look, we might be nearing the final third of our crisis. That’s good for America, but not so much for CODX stock.
Why You Don’t Want to Ignore CODX Stock
Naturally, many of my InvestorPlace colleagues have warned against buying Co-Diagnostics. From a topical perspective, shares look like a pure play on a temporary event. Let’s not forget that the company offers testing kits for other viruses, such as Zika. Yet shares haven’t really gone anywhere until recently.
And I don’t necessarily disagree with them. You could easily make the technical argument that CODX stock has moved too far, too fast. Plus, as the urgency for testing dies down, it’s very possible that we’ll see a sharp correction.
Nevertheless, you’ll want to keep an eye on CODX stock for the simple reason that it has become unusually relevant. Currently, everyone in Washington is focused on saving lives and livelihoods. As more than one expert has warned, the U.S. faces cataclysmic economic turmoil unless the federal government acts resolutely.
But when the dust starts to clear, we’re going to have high-level investigations and the blame game will start. Frankly, many folks in D.C. and other jurisdictions need to lose their jobs.
Immediately, one of the critical failures that is patently obvious to everyone was the initial lack of testing. By the end of February, community spread in Oregon, California, and especially Washington began sprouting. Unfortunately, a lack of testing prevented identification of hot spots. Today, Washington has nearly 2,600 cases, whereas on Feb. 29, the entire nation had only 68 cases.
Sadly, if the federal government acted sometime in February, we could have mitigated the present crisis sooner. It wasn’t until testing became more widely available and until bodies started filling hospitals throughout the country that we understood the true extent of the problem.
But this understanding should have come well before, needlessly destroying lives and businesses.
Co-Diagnostics Is a Play on the Future
Would advanced testing really have made a difference? In my opinion, it would have. True, there is a counterargument that excessive testing could create panic. However, recognizing the spread of Covid-19 in February would have made everyone in government take notice.
As it turned out, the lack of testing gave our leaders a false sense of security and perhaps exceptionalism. It’s just like the flu, some have stated. Or to paraphrase President Trump, it’s fake news.
Now, many people are walking back their bravado. More critically, the U.S. and the rest of the world have set a precedent. Our new normal is that we are willing to shut down vibrant economies to combat an infectious disease.
Obviously, the frightening point is that infectious diseases occur all the time. To prevent the next virus from crippling global economies, we need companies like Co-Diagnostics. It’s just that simple.
What’s not so easy to figure out is an appropriate price for CODX stock. I’d wait a bit for shares to cool off, which I anticipate happening. However, by no means do I think this is a one-and-done deal, not with the unnecessary economic devastation we’re about to walk into.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. As of this writing, he did not hold a position in any of the aforementioned securities.
