The novel coronavirus is a double-edged sword that brings both a health crisis and an economic one. Most investments have seen worrying amounts of red ink. As with any crisis, though, a few outliers have performed very well, such as pharmaceutical firms. While Co-Diagnostics (NASDAQ:CODX) has an extremely relevant business, most folks have been caught off guard with how high CODX stock has rocketed.
Shares have gained nearly 1,450% since January’s opening price. Under any circumstance, that is a profoundly remarkable haul. But with a prolonged recession steadily becoming a foregone conclusion among several economic analysts, CODX stock is a true phenomenon.
But just how likely is it that this rally could continue?
To be fair, fundamental justification exists for this wild surge in market value. On May 1, CODX revealed perfect scores in specificity and sensitivity regarding its Covid-19 detection tests. These two metrics are used to determine accuracy. And with a 100% score on each, Co-Diagnostics chief scientific officer Brent Satterfield said on a written statement, “You can’t do better than that.”
Following the announcement, CODX stock closed up nearly 19%. Although it’s risky to chase what was literally a penny stock for much of 2019, surrounding factors may provide an unexpectedly longer-term upside pathway.
Currently, most of the mainstream focus centers on treatments or vaccines for Covid-19. Therefore, Gilead Sciences (NASDAQ:GILD) has received a nice boost this year – albeit a choppy one – due to its promising remdesivir antiviral drug.
However, a treatment for the novel coronavirus can’t function effectively outside of a capable testing infrastructure. Hence, what’s good for Gilead is also positive for CODX.
Demand for Testing Supports CODX
Let’s set aside the shaky track record of Co-Diagnostics as it relates to its technical charts. Fundamentally, the case for accurate, large-scale testing has only increased.
As the White House health advisor, Dr. Anthony Fauci, warned, Covid-19 could return in the fall. Understandably, this is not the news that Americans want to hear. Most of us have been forcibly quarantined for more than a month. Though some states are reopening, others remain closed. In this heightened environment, there’s a temptation to lash out against perceived fearmongering.
However, many medical professionals have come forward, expressing their concern of a Covid-19 repeat. Based on historical data, coronaviruses tend to peak in the winter months. Even more worrying, Dr. Greg Poland, a professor of medicine and infectious diseases at the Mayo Clinic, stated that “often, not always … often the second wave of a pandemic is worse.”
Logically, both medical experts and some state governors have fears about rendering the sacrifices the public made for naught. Still, holding the economy hostage for a crisis that might not happen appears untenable. And this is where the longer-term outlook improves for CODX stock.
If Covid-19 resurfaces, it will likely do so at the start of the flu season. As many pundits initially warned, it’s the flu that we should be worried about. Now, we’ll jump into a paradigm where we must worry about both.
But it’s vital that if these two diseases are infecting people in tandem, that we understand who has what. Therefore, an accurate diagnostic is necessary not only to keep precise statistics, but also to administer effective solutions. Hopefully, this will help reduce the burden to our healthcare system that almost crippled us.
Co-Diagnostics Is Also an Economic Lifeline
Obviously, one of the factors that has made the coronavirus unprecedented is the governmental response. As I wrote in March, “Our new normal is that we are willing to shut down vibrant economies to combat an infectious disease.”
As I alluded to above, we can’t afford another shutdown. Over a six-week period, 30 million Americans have filed for unemployment benefits. As several analysts have pointed out, that number is likely understated as several million workers failed to reach their state benefits offices. In addition, the next batch of layoffs could impact higher-paying jobs in business and managerial roles.
In other words, if Covid-19 strikes back, we’re going to have to deal with it while keeping the economy open. This is similar to what we did with the H1N1 pandemic. But if this is going to work, we’ll need effective diagnostics. Naturally, this augurs well for CODX stock.
Admittedly, I still don’t like the idea of chasing speculative names. If you’re interested, I suggest waiting for a pullback. However, my main thesis remains the same. Co-Diagnostics is a surprising long-term play. Recent events only add confidence to this narrative.
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.
