Alpha Pro Tech (NYSE:APT) has become one of the top face mask stocks to own.
After all, with the U.S. Centers for Disease Control and Prevention advising that everyone should wear a face mask in public, they’ve become a hot commodity.
In fact, “under the new recommendation, healthy people are advised to wear mouth and nose face coverings — including homemade masks, scarves or bandanas — when they go to a public area, such as the grocery store or a pharmacy,” reports Live Science contributor Laura Geggel.
There’s just one problem. There’s been a severe shortage. The U.S. needs 300 million respirators and face masks. However, according to U.S. Health and Human Services Secretary Alex Azar, the U.S. only had 30 million masks available. Even 3M (NYSE:MMM) CEO Mike Roman noted, “The demand we have exceeds our production capacity.”
Helping with supply issues, APT stock is just beginning to show signs of life. In fact, with the coronavirus still making life “fun,” we’ll need many more masks. That being the case, I wouldn’t be shocked to see APT stock at $20 soon.
Demand Will Far Outweigh Supply for Quite Some Time
The coronavirus story is only getting worse.
At the moment, more than 3 million people have been infected and more than 211,000 have already died around the world. In the U.S. alone, there are 1 million cases and 56,000 deaths.
Schools and businesses have closed down. Stay-at-home orders have been issued in several states. Hospitals and essential staff are being overwhelmed with patients. In some states, you can’t step inside a food store without a mask on, increasing the need for more.
APT Has Seen a Jump in Orders
That’s why Alpha Pro Tech continues to see a steady stream of big orders.
The company says from Feb. 27 to March 11, it booked a 60% increase in orders for its N-95 particulate respirator face mask, giving the company an additional $8.5 million in revenue. Then from March 11 to April 7, APT saw another 62% increase in orders, an increase of another $14.1 million. In all, the company booked about $36.7 million in orders for its face masks since Jan. 27.
In comparison, the company’s average annual sales of N-95 face masks over the last three years was $1.6 million.
“APT has seen exponential increases not only in near-term demand, but also in longer-term ongoing purchase orders that have request dates that extend beyond the third quarter of 2020 and into the first half of 2021,” the company said in a statement.
This is Why APT Stock Can Accelerate Higher
Granted, the argument can be made that APT stock is a quick trick pony. Once the coronavirus threat is over, the stock could easily collapse. While true, we have no idea when that could potentially happen. There are no vaccines. There’s fear of reinfection. There’s fear this could become a seasonal issue. That’s why APT stock could continue to accelerate higher.
Better still, “Amid strong demand, Alpha Pro Tech now expects to complete the ramp-up of N-95 face mask production in two stages. Stage one is expected to be done by early May, and stage two by late summer. This will enable the Arizona-based company to fulfill current and expected future orders,” says Investor’s Business Daily contributor Aparna Narayanan.
At the moment, we need more masks. Alpha Pro Tech can help us get more masks. As that happens, we should see higher highs in the stock, as sales come pouring in.
Again, I would not be shocked to see APT stock closer to $20 a share, in the near term. In my opinion, it’s a strong buy at current prices.
Ian Cooper, an InvestorPlace.com contributor, has been analyzing stocks and options for web-based advisories since 1999. As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.