Abbott Laboratories Is a Surefire Covid-19 Diagnostics Investment

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With so many health-care sector investors focused on Covid-19 vaccine candidates, some traders are missing out on other opportunities. Abbott Laboratories (NYSE:ABT), for example, is contributing to the battle against the novel coronavirus and ABT stock holders are earning strong returns, yet the company’s focus isn’t on a vaccine.

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Rather, Abbott’s primary concern is supplying testing instruments for Covid-19. This is an excellent business to be in. While other health-care companies can climb over each other in the race to bring a successful vaccine to market, Abbott can quietly and profitably produce massive quantities of Covid-19 tests.

Ever since U.S. Vice President Mike Pence said, “we don’t have enough tests today to meet what we anticipate will be the demand going forward,” there’s been no doubt that the Covid-19 testing market would remain strong for many months.

Skeptics might argue that all of the foregoing has already been priced into Abbott stock. And indeed, it is evident that the shares have been on a tear lately. Yet, an argument could be made that there’s much more room for ABT to run.

A Closer Look at ABT Stock

On Aug. 14, I recall watching Abbott stock closely to see if it would close the day at exactly $100. The market must have a cruel sense of humor as the stock ended the day at $99.99.

Abbott stock hasn’t been cruel to long-term investors, though, as the gains have been phenomenal during the past several months. To provide some perspective on this, consider that the 52-week low price for ABT is $61.61.

Plus, ABT shareholders can expect to collect an annual forward dividend yield of 1.42%. With all of that in mind, it’s difficult to construct a strong bear case for Abbott stock.

On the other hand, value investors might be concerned that ABT’s trailing 12-month price-to-earnings ratio is 57.76. That’s fairly high, but a lofty P/E ratio could be sustainable if the company is profitable. And in the case of Abbott Laboratories, there are definitely profits coming in.

A Pivot to Testing

Some of those profits are still coming from Abbott’s pre-coronavirus medical devices, no doubt. It’s not as if the company has completely shifted to Covid-19 test making and ignored everything else.

That being said, one can’t really blame Abbott for making a decisive move into the coronavirus test-instrument market. Impressively, coronavirus tests enhanced Abbott’s top line by $615 million during 2020’s second quarter.

Also during that quarter, those coronavirus tests accounted for more than 8% of Abbott’s total revenues. Plus, they comprised around 31% of the company’s quarterly diagnostic-segment revenues.

More Tests, More Profits

The foregoing numbers are impressive, and much of it is due to Abbott’s variety of test types. Abbott Laboratories President and CEO Robert Ford alluded to this during the company’s second-quarter conference call:

“As we think about the continuum of diagnostic testing for COVID-19 going forward, we see the environment unfolding across a few phases… In addition to molecular testing during this period, we would anticipate increased demand for other types of tests, including both antigen and antibody.”

While other manufacturers might rely on just one type of test, Abbott offers five Covid-19 tests. Three of them are molecular tests, while the two others are serology tests, a.k.a. antibody tests.

Perhaps the most noteworthy of these tests are Abbott’s Covid-19 antibody tests, which are marketed under the brand names ARCHITECT and Alinity i. Between these two brands, Abbott sold more than 13 million Covid-19 antibody tests in the U.S. as of Aug. 5.

The Bottom Line

It would be unwise to bet against Abbott Laboratories at this point as the company is carving out a sizable portion of the coronavirus-diagnostics niche. Therefore, even if a successful Covid-19 vaccine were somehow discovered tomorrow, there should still be plenty of room for ABT stock to grow.

As of this writing, David Moadel did not hold a position in any of the aforementioned securities.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.


Article printed from InvestorPlace Media, https://investorplace.com/2020/08/abt-stock-is-a-surefire-covid-19-diagnostics-investment/.

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