Covid-19 related stocks started spiking again this week. Driven primarily by reports about new variants and increasing spread. This news has been a shot in the arm for some struggling pharma stocks. Shares of the four biggest Covid vaccine manufacturers are down 20% since January but began ticking upward again on the news.
Already pharmaceutical companies are creating, manufacturing and distributing boosters to target new variants. Likewise, the Biden administration is urging Americans to get boosters in an effort to slow or stop the spread as we enter cooler weather and collectively migrate indoors, a trend that’s long been associated with increased illness rates. No matter the details, Covid and its variants are now endemic, and something we’ll likely live with indefinitely. For investors, the pervasive nature of the illness may represent opportunity.
CVS Health (CVS)
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CVS Health (NYSE:CVS) is down nearly 30% this year, but this healthcare retailer represents a quality long-term play that’ll likely see a Covid-19 related boost. CVS is one of the go-to testing sites offering drive-through diagnostics for Covid. The company runs more than 4,800 testing centers and vaccination at nearly 10,000 sites. Both testing and vaccination rates have fallen since 2022. Last year, the company ran 32 million tests and administered almost 60 million vaccines.
Likewise, CVS’ share price fell alongside Covid’s decline, but this new surge may push the stock back up.
CVS is a value play for long-term investors, too. Ranked at #6 on the Fortune 500 list, CVS’ retail and integrated healthcare network services more than 100 million customers. 85% of Americans live within 10 miles of a CVS, further reinforcing the company’s national market penetration. And, while waiting for a stock reversal, investors can take advantage of a comprehensive company commitment to returning shareholder value. The company’s dividend yield is 3.5%, and in 2022 the firm returned more than $795 million to investors in distributions.
Quest Diagnostics (DGX)
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Quest Diagnostics (NYSE:DGX), renowned for its diagnostic testing expertise, hasn’t been meeting the post-pandemic projections set by analysts. The company’s CEO pointed out that a recent dip in earnings was primarily attributed to a sharper-than-anticipated decrease in Covid revenues. That may soon change with a surge in Covid-19. In Q1 2022, the company generated almost $600 million in testing revenue. That sales sweep fell to a paltry $199 million over the same period in 2023.
At the same time, it’s worth noting that Quest’s fundamental operations remain resilient, with a 10% increase in revenue from its main, non-Covid business segments. Quest is on a steady recovery trajectory in the grand scheme independent of Covid-19’s return. The leadership foresees a consistent 2% annual revenue growth up to 2024. Further bolstering its market position is an enhanced testing arsenal, now enriched with state-of-the-art AI capabilities.
Like CVS, Quest has substantial upside potential beyond Covid. And a surge in testing demand may provide a quick booster to ailing stock prices while it’s core operational revenue catches up.
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An obvious Covid-19 play is Pfizer (NYSE:PFE). But, just because it’s obvious, doesn’t mean investors should underestimate its potential. The pharma giant’s already seen a share price jump on recent Covid news. But a quick, short-term climb likely won’t be the only benefit Pfizer sees.
Pfizer’s newest booster shot already shows promise in addressing the newest variants. Those new variants represent almost 20% of new cases assessed between July 23rd and August 5th. Rising cases indicate a climb that Pfizer is well-suited to capitalize on. Alongside variant increases, hospitalization rates jumped 40% from June’s low. When Pfizer rolls out its vaccine in September, there will likely be a demand jump from those nervous about variants.
Of course, Pfizer remains a strong pharma play beyond Covid. The company has 90 drugs in its pipeline, with many in the latter half of testing required before going to market. Pfizer is here to stay, and its terrible stock performance since January isn’t indicative of its long-term potential.
On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Jeremy Flint, an MBA graduate and skilled finance writer, excels in content strategy for wealth managers and investment funds. Passionate about simplifying complex market concepts, he focuses on fixed-income investing, alternative investments, economic analysis, and the oil, gas, and utilities sectors. Jeremy’s work can also be found at www.jeremyflint.work.
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