Co-Diagnostics (NASDAQ:CODX) stock was a much hotter, more headline-worthy play in the early innings of the pandemic.
Back then the company was swept up in the fever to get in early on anything and everything adjacent to Covid-19.
On Jan. 23, 2020 Co-Diagnostics announced that it had completed principal design work on its PCR diagnostic test for Covid-19.
The diagnostic laboratory products company was pulled from under $1 per share to above $17 in late February. CODX stock would approach $30 by July’s end but trade down from there.
The question now becomes whether it makes sense to buy into Co-Diagnostics at its current low prices.
Still a Pandemic Play?
More and more people are getting vaccinated in the U.S. and around the world. It is becoming clear that 2021 will see an end to the pandemic and a return to normalcy.
The country and the world seem more concerned with impending economic ramifications and realities than the pandemic. That doesn’t bode well for Co-Diagnostics as it attempts to leverage the pandemic for more profits.
The company recently indicated that it has a new strategy for its business as it relates to the pandemic moving forward.
CEO Dwight Egan recently described that strategy in an interview with Yahoo! Finance saying the company’s future is oriented toward at-home and point-of-care testing.
“Our new platform, currently in development and subject to regulatory approval, will empower individuals and organizations to know their COVID-19 status quickly and accurately, with do-it-yourself tests that could be performed in multiple settings,” Egan said.
The Plan Draws Skepticism
The immediate question that springs to mind is what kind of market is there for such tests? I can envision at least one problem with this strategy. Humans are much quicker to accept testing from figures of authority.
If a health professional tells me I’ve tested positive for Covid-19, I’d be much more likely to believe it than otherwise. Co-Diagnostics plans to sell their test for at-home and point-of-contact use. That means lots of non-healthcare workers administering tests and lots more room for error.
Further, let’s say a non-healthcare worker administers a Co-Diagnostics PCR test and it comes back positive. People are much more likely to dismiss the results even if they are true.
This new sales strategy looks like a very hard sell to me.
Investors who read through Co-Diagnostics’ most recent year-end SEC filing will quickly find out that CODX stock has long been volatile. In fact, the company faced delisting prior to the pandemic and there’s no guarantee it won’t again.
Prior to the tailwinds provided by the pandemic, Co-Diagnostics was a company that had lived its life as a penny stock. It barely jumped above $5, technically moving out of penny stock territory, only briefly in 2018. Otherwise it has fluctuated quite wildly each quarter routinely dipping below $1 and then back to $2-3 per share.
That might make it ideal for traders, but it doesn’t inspire much confidence otherwise.
The Bottom Line on CODX Stock
Last year, Co-Diagnostics recorded $74.55 million in revenues, $57.96 million in gross profits and $42.5 million in net income after all the expenses it incurred. That’s certainly laudable for a company of its size.
Yet, investors who look back to 2019 might begin to worry that the company may be returning to where it was as the pandemic slows.
Those $74 million in revenues throughout 2020 were 345X smaller in 2019 when Co-Diagnostics recorded under $215k in revenues. The $42 million in net income from 2020 was a $6.195 million net loss a year earlier.
I believe CODX stock will probably trade sideways for the time being. Markets will want to see how its sales strategy plays out for a little bit, but I think it’s really a sell moving forward.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article.