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COVID-19 Resurgence Accelerates Diagnostic Testing: 3 Top Picks

·5 min read
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The pandemic-hit investment world, during the process of finding COVID-proof profitable sectors, has by now recognized MedTech’s unabated and nuanced growth trend. During the pre-pandemic era, this sector, with limited success history, was never one for big betting. COVID-19 challenges however have changed the investment landscape, making MedTech one of the safest and profitable hunting grounds for investors.

The MedTech sector started witnessing a steady rebound from the second half of 2020, thanks to a number of positive developments, including a series of COVID-19 diagnostic test launches and a large-scale shift of consumer preference toward digital healthcare options. The solid uptick in the non-COVID product portfolio and emergency medical services also aided the fast recovery of the sector.

COVID-19 Testing Demand Continues in 2021

It was initially thought that with mass-scale vaccine rollout, COVID-19 testing makers will gradually lose their ground. However, with the renewed wave of coronavirus cases along with emergence of new mutant strains, diagnostic laboratories are once again overwhelmed by the enormous pressure of developing COVID-19 test kits.

Government Initiatives

Earlier this year, the Centers for Disease Control and Prevention (CDC) had announced that The Department of Health and Human Services (HHS) will offer more than $22 billion of funding to states, localities, and territories to support the nation’s response to the COVID-19 pandemic. This is as directed by the Coronavirus Response and Relief Supplemental Appropriations Act.

From this amount, $19 billion will be used to support testing, contract tracing, surveillance, containment, and mitigation to monitor and suppress the spread of COVID-19.

One-Year Price Performance

Not only this, the President’s recently-passed $1.9 trillion American Rescue Plan includes $400 billion of funding for critical measures to slow down the spread of the infection.

Federal Tie-Ups With Testing Companies

At this point, government representatives are going all out to increase the nation’s testing capacity and forming federal-private tie ups to increase COVID-19 testing volume. Abbott ABT recently completed its promised supply of 150 million BinaxNOW COVID-19 tests to the government. In a major development earlier this week, this rapid antigen self test received the FDA’s Emergency Use Authorization (EUA) for over-the-counter, non-prescription, asymptomatic use.

Quest Diagnostics DGX in January 2020 entered into a mega-testing deal to aid public health response to COVID-19. This public and private collaboration is expected to help CDC to come up with a large-scale longitudinal genomic survey of the SARS-CoV-2 virus using Quest Diagnostics’ COVID-19 testing data and patient samples across the United States.

Beckton Dickinson and Companyor BD BDX announced a $24 million investment in August 2020 by the Department of Defense (DOD) in collaboration with the HHS to support the scale up of U.S. manufacturing capabilities for BD Veritor Solution for Rapid Detection of SARS-CoV-2. Later in November, BD received an order from the government of Canada for 7.6 million tests through March 2021 to support the country’s planning of an advanced COVID-19 testing strategy.

Best Diagnostic Testing Stocks to Buy Now

The above developments show that there couldn’t be a better time to invest in diagnostic testing stocks. We have narrowed down our search to the following stocks based on a favorable Zacks Rank and strong prospects for 2021.

Fulgent Genetics FLGT: Fulgent was recognized as the #1 provider of COVID-19 tests in California by California Department of Public Health in late January, processing the highest volume in tests. In terms of COVID-19 testing capabilities, the company noted that its tests have been detecting all major mutations of the virus.

For 2021, the Zacks Consensus Estimate for revenues indicates an improvement of 90.1% from the prior-year period. In the past year, this Zacks Rank #1 (Strong Buy) company shares have gained 863.3%, outperforming the Medical industry’s rally of 22.5%.

You can see the complete list of today’s Zacks #1 Rank stocks here.

Bio-Rad Laboratories BIO: The company is consistently witnessing an uptick in polymerase chain reaction (PCR), Droplet Digital PCR (ddPCR) and Process Media product revenues, resulting from robust demand due to COVID-19 testing and related research. Continued momentum of the ddPCR business looks encouraging. The recent receipt of the FDA’s EUA for COVID-19, influenza A and influenza B RT-PCR (Reverse transcription PCR) syndromic multiplex test along with another EUA for the company’s COVID RT-PCR assay kit (obtained in January this year) look encouraging.

For 2021, the Zacks Consensus Estimates for revenues and earnings indicates an improvement of 5.2% and 6.9% respectively from the prior-year period. Year to date, this Zacks Rank #2 (Buy) company’s shares have gained 58.3%.

IDEXX Laboratories IDXX: The company’s human health business, OPTI Medical Systems’ COVID-19 human PCR testing is currently strongly contributing to its top line. Further, amid the pandemic-led restrictions, IDEXX is witnessing a sequential improvement in Companion Animal Group instrument placements.

For 2021, the Zacks Consensus Estimates for revenues and earnings indicates an improvement of 14.3% and 13.1% respectively from the prior-year period. Over the past year, this Zacks Rank #2 company’s shares have gained 104.1%.

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Becton, Dickinson and Company (BDX) : Free Stock Analysis Report

Quest Diagnostics Incorporated (DGX) : Free Stock Analysis Report

BioRad Laboratories, Inc. (BIO) : Free Stock Analysis Report

FULGENT GENETIC (FLGT) : Free Stock Analysis Report

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