Medical device maker Hologic (NASDAQ:HOLX) has carved out a meaningful place in the field of women’s health. But it’s the company’s tests for the novel coronavirus that are fueling the present upward trend, making Hologic stock an appealing growth stock as we head into the second half of the year.
Since January 1, Hologic stock is up 2%. as its stock collapsed with the rest of the market in February and March as the Covid-19 pandemic shut down most of the U.S. Of course, even that paltry growth is something to be happy about, given the way many companies have seen share prices nosedive.
But since March 23, HOLX is up a whopping 82%, giving the Massachusetts-based company a market capitalization of nearly $14 billion.
Much of the company’s gains came following an announcement in May that Hologic’s Aptima SARS-CoV-2 test had received emergency use authorization from the Food and Drug Administration to detect Covid-19.
Hologic says it can produce about 1 million Covid-19 tests per week.
Also, Hologic received funding from the Department of Health and Human Services for a molecular diagnostic test for the coronavirus. At the time it was announced, the test was the first selected for development through the agency’s biomedical advanced research and development streamlined selection process.
Testing and contract tracing are the biggest weapons we have against the coronavirus, particularly since a cure is at least several months away. As states continue aggressive testing programs to identify and confirm coronavirus cases, companies such as Hologic will be particularly important players.
Hologic Stock at a Glance
Outside of its coronavirus tests, Hologic is best known for its products to promote and care for women’s health. It has a range of imaging and biopsy products related to breast and skeletal products, as well as gynecological surgical products and a sizable diagnostic product division.
In April, Hologic reported fiscal second quarter earnings of $756.1 million and $0.36 per share, with profits of $94.8 million. Those were in line with Wall Street’s expectations.
Hologic announced that its Covid-19 tests are expected to help the company’s diagnostic revenue grow by 20% to 25% in its fiscal third quarter. That’s significant, considering that the ongoing impact of the coronavirus are expected to impact the company’s breast and skeletal health division by as much as 35%, and surgical revenue is expected to fall by 65% to 70%.
CEO Stephen Macmillan expressed optimism that the company’s women’s health products will rebound:
“Obviously, women are affected by COVID-19, but when the pandemic is under control, demand for our market-leading products and services will come back. Early detection of diseases like breast and cervical cancer will always be important. And our promise is rooted in what we call The Science of Sure, providing highly accurate, differentiated products, which has never been more important than when combating a public health crisis. As difficult as the current environment is, I have never been more energized about our chance to play a major role in the toughest issue facing the world today while knowing that our efforts today are also strengthening us for the future.”
Analysts are trending bullish to HOLX, with BTIG Research raising its price target from $54 to $60. Needham & Company analysts also reaffirmed its buy rating.
The Bottom Line for Hologic Stock
For now, the company’s coronavirus testing are the biggest drivers of Hologic stock. One million tests per week may sound like a lot, but since the pandemic began, only about 33 million tests have been conducted in the U.S. That’s just a small fraction of the scale of testing needed to bring the pandemic under control.
Looking ahead, I’m confident that even after a vaccine is discovered and produced, that there will be a long-term need for Covid-19 testing for the foreseeable future.
I’m also convinced that as lockdowns are lifted and society begins returning to some semblance of normal, people will start focusing on health issues unrelated to the coronavirus again. Hologic’s women’s health division will subsequently rebound.
Hologic stock has a “buy” recommendation in my Portfolio Grader right now, where it carries a “B” grade.
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.