How many stocks can you name that have seen over 1,800% growth in 2020? That is spectacular growth at the best of times. In 2020? It’s unheard of. Those are the numbers that Co-Diagnostics Inc (NASDAQ:CODX) has put up, rising from a penny stock to trading at $17.45 in just five months. The novel coronavirus pandemic has hammered markets, but while most stocks are struggling to recover, CODX stock has soared.
That will happen when a company is one of the few in the world that makes COVID-19 testing kits. The reality is that the coronavirus pandemic is not going anywhere any time soon. In order to return to a resemblance of normalcy, we need to have effective tracking of COVID-19 cases. In order to have tracking, we need testing ramped up.
That means demand for Co-Diagnostics testing kits is not going to drop off as the country starts to re-open for business. It’s going to increase. You can see where this is going in terms of CODX stock.
CODX Stock and the Rush for COVID-19 Testing
When the coronavirus pandemic hit our shores, there was an immediate run on key medical supplies. Ventilators and masks got much of the attention, but there was also a serious shortage of COVID-19 viral tests.
These aren’t the controversial antibody tests that attempt to find out if someone had been exposed to COVID-19 at some point in the past. These are viral tests — the swabs that show whether someone actually has COVID-19. It doesn’t take a rocket scientist to realize that these tests are critical. Without them, anyone with so much as a sniffle would be fair game to be admitted to the hospital under suspicion that they may be infected. That would be a disaster.
COVID-19 viral tests are critically important. They are in demand not just in the U.S., but globally. The thing is, not many companies make these. Abbot Laboratories (NYSE:ABT) is one of them. So is Co-Diagnostics.
The company has been swamped by orders for testing kits by states, as well as over 50 countries worldwide. When CODX reported its first quarter earnings last week, it noted that it had manufactured over 6 million COVID-19 tests to date — with very healthy 71.5% margins on its Logix Smart COVID-19 test kits. In addition, it had orders on the books for an additional 20 million tests to keep up with current and expected short-term demand.
In the first-quarter earnings call, the Co-Diagnostics’ CFO summed up the company’s financial health:
Co-Diagnostics remains debt-free, with a solid balance sheet, and with revenues that have enabled us to achieve year-to-date net profit by May 14, 2020.
Ongoing Testing Is Key for CODX Stock
The rapid growth of CODX stock could be written off as investor excitement over a stock that finds itself in the spotlight. That rare company set to profit from the coronavirus panic. As the country pushes to re-open and return to business as usual, the initial panic wears off. And that would take the shine off Co-Diagnostics.
However, the reality is that any return to business as usual requires ongoing testing for COVID-19. That testing has to be at levels that dwarf what is currently being done. There are calls for testing 20 million to 30 million people per day, in the U.S. alone.
Look at the performance of CODX so far in 2020 with the company producing a total of 6 million test kits. Now consider what that the future looks like for Co-Diagnostics if the U.S. needs to administer five times that many tests every day.
Suddenly, over 1,800% growth in 2020 for CODX doesn’t make the stock seem over-valued. Rather, it seems to leave room for that growth to keep going.
Bottom Line for CODX Stock
Not everyone is onboard the Co-Diagnostics train. Some see the stock as being volatile — which it is. But when that volatility is a burst of quadruple digit growth, then I take notice. Yes, the company has competition, but if Co-Diagnostics is able to meet demand, then new competition is less of a threat. Most of the companies hoping to bring new COVID-19 test kits to market are hoping to to get a foot in the door based on a shortage of kits from Co-Diagnostics and Abbott Laboratories.
The bottom line is, even if a COVID-19 vaccine is successfully developed, it will take years for production to ramp up and the entire population to be vaccinated. During that time, aggressive COVID-19 testing is going to be required. That means CODX stock has virtually zero chance of returning to penny stock status any time soon. In fact, it’s perfectly positioned for continued growth in 2020.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.