Covid Fatigue Threatens to Derail Once Relevant Quidel

As one of the more intriguing narratives during this novel coronavirus pandemic, Quidel (NASDAQ:QDEL), a medical diagnostics firm, is relevant so long as this health crisis stays front and center. True, this has a cynical tone to it and I’m not suggesting that Quidel’s management team want an extension of this disaster. Nevertheless, QDEL stock was a beneficiary of the pandemic.

Woman surgeon with cap and face mask
Source: iStockphoto

Personally, I believe the numbers speak for themselves. Last year, QDEL stock gained a whopping 140%. But in all of 2019, Quidel shares returned 56%. True, this is a respectable stat but as President Biden might say, come on, man! It’s usually not what the company is capable of delivering in a non-pandemic year. And that begs the question – can it thrive without Covid-19?

If you look at the year-to-date performance of QDEL stock, you might say the answer is a resounding no. Shares are down 28% and trending poorly. Yet the broader fundamentals offer some hope if you want to call it that.

While most of us regard the new strains of the SARS-CoV-2 virus with some trepidation of what that implies for personal health and society at large, it could be what gives QDEL stock a desperately needed lifeline. According to various news reports, medical experts believe these new strains are more contagious than prior forms of the coronavirus.

Worryingly (especially if you don’t own Covid-fueled shares), the Wall Street Journal reported that a new variant called P.1 has overwhelmed hospitals in Brazil, impacting younger patients. Since the WSJ leans more conservatively and definitely doesn’t pander to sensationalism, the story is one to consider in your analysis.

Also, several European countries have imposed new lockdown measures to combat another wave of coronavirus cases. Over the trailing year-plus, Europe represented a harbinger. It’s possible (though not guaranteed) that the same can happen again.

Why You Don’t Want to Rush into QDEL Stock

Recently, I had an interesting discussion with a cineplex manager who reported a significant uptick in business near the Seattle, Washington area. He now states that he’s constantly busy and that his company is hiring new workers.

Anecdotal, yes but at the same time, these are not actions that an organization on the brink of disaster would probably take. And interestingly, this observation contrasts with what high-level sources like Deloitte have revealed, noting that most Americans are unwilling to go to the movie theaters until around mid-2021.

If what’s apparently happening in Washington applies to other parts of the country, this might not be good news for QDEL stock. It seems that people are tired of lockdowns and mask-wearing mandates. After a year of these restrictions, it’s hard not to sympathize with this sentiment.

I don’t want to drive QDEL stock into a political narrative but the reality is that the Europeans have gone under lockdown multiple times before. That they’re doing it again suggests that these measures aren’t working.

Further, while some governments such as Germany have been standup actors in that they financially supported their workers during the lockdowns, simple economic realities indicate that this can’t go on indefinitely. In other words, the international community might realize that we just have to deal with it and hope that the crisis fades one way or another.

Not only that, the Europeans themselves are tired of the strict protocols – not just crazy Americans. Trying to read the room, I believe the overriding sentiment right now is exasperation: with masks, lockdowns and perhaps even testing.

Also, with millions of people still working from home, there doesn’t seem to be much incentive in getting tested for Covid. This doesn’t mean that you should necessarily avoid QDEL stock. However, you should probably assess the ecosystem before placing a big bet.

No Prevailing Incentive for Testing

Another interesting tidbit to consider is the delayed Summer Olympics. As you’ve heard, the Tokyo Olympics committee announced that no overseas spectators will be allowed to attend the games. That’s a huge blow for multiple transportation, lodgings and service-related businesses but it also negatively impacts QDEL stock and related investments like Abbott Laboratories (NYSE:ABT).

To be fair, Abbott is in much better shape than Quidel but the quarantined games is a bummer because it means there’s no prevailing incentive for Covid testing. Thus, the added demand uptick from Japan is essentially zero. So too are the hundreds of countries whose citizens were looking forward to visiting Tokyo.

Combine that with how tired arguably most folks are about Covid restrictions and you don’t have the most confident case for QDEL stock right now.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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.

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