Short hugs seem to have become something of a national pastime. Several severely short-circuited stocks have risen in the air this year, mostly because they were targeted by Reddit users who were looking for opportunities to make a lot of money very quickly.
Many of these stocks could have been lucrative to trade as short sellers rushed to cover their positions. However, most of them are not good choices for long-term investors. Their underlying business dynamics are still not good despite their rising stock prices.
However, there is at least one notable exception. Here is a short-term stock that is actually a smart choice to buy and hold in the long run.
Crush it in COVID-19 test
Fulgent genetics” (NASDAQ: FLGT) shares have more than tripled so far this year. Some of these gains have been the result of a brief press release. Nearly 30% of Fulgent’s float was sold shortly since the end of January.
However, there is also another reason behind health care stockimpressive performance. Fulgent has completely crushed it with its COVID-19 test products and services.
In 2020, Fulgent turned away from its primary genetic testing products to focus on COVID-19 testing. In the third quarter of last year, it generated nearly $ 102 million in revenue, which is a huge increase of 880% year over year. Most of this growth came from its COVID-19 test.
The company’s COVID-19 reverse transcription polymerase chain reaction (RT-PCR) test won emergency use approval (EUA) from the US Food and Drug Administration (FDA). Fulgent also offers a next-generation sequencing COVID-19 diagnostic test and an antibody test for laboratory use only. Physicians and healthcare facilities may even order a three-in-one test to diagnose COVID-19, influenza A and influenza B. In addition, Fulgent and Picture Genetics collaborated on a home COVID test.
Will Fulgent’s COVID-19 revenue growth slow? Of course. As more people are vaccinated, COVID-19 test volumes are likely to decrease. However, the new coronavirus does not disappear. It will continue to mutate, with new strains emerging. Fulgent is likely to continue to generate solid revenue from COVID-19 testing for a long time to come.
But wait – there’s more
However, do not overlook the rest of Fulgent’s business. In the third quarter, the company’s non-COVID revenue increased by 57% quarter over quarter. It is impressive growth in itself.
Fulgent initially focused on genetic testing for rare pediatric diseases. It then expanded to test for cardiovascular and neurological disorders and for cancer. Today, the company offers a wide range of genomic tests.
There are, of course, other players in the genomic test market. How can Fulgent win? The company has two primary competitive advantages. First, the flexibility of its technology allows Fulgent to quickly launch new products and services. Second, Fulgent boasts a market-leading cost structure.
Companies usually beat their rivals by either being better, faster or cheaper. Fulgently tick at least two of these boxes.
The long and short of it
It is possible (and perhaps even likely) that Fulgent’s stock price will retreat significantly this year as the euphoria from the COVID boom and the short squeeze wears off. Some Wall Street analysts almost hate the stockwith the average analyst’s price target just over half of Fulgent’s current share price.
But the long-term potential of Fulgent is compelling. The global genetic testing market should reach $ 10 billion by 2022. That’s just the start. Expect a start-up in consumer-driven genetic testing over the next few years.
Even with the stock’s huge start-up this year, Fulgent Genetics’ market value is below DKK 4 billion. $. Given the company’s overall addressable market and its ability to execute, I think Fulgent could be worth a lot more at the end of this decade.
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