Markets

Why a New COVID-19 Test Is Giving Shake Shack and Other Restaurants a Big Boost

With Abbott Laboratories (NYSE: ABT) developing a $5 COVID-19 test that takes 15 minutes to produce results with no additional equipment required, dozens of restaurant stocks climbed today, including Shake Shack (NYSE: SHAK), up 6%, The Cheesecake Factory (NASDAQ: CAKE), with 4.91% gains, Bloomin' Brands, Inc. (NASDAQ: BLMN), up 3%, and Darden Restaurants (NYSE: DRI), up 3.66%, among others.

Those restaurants with a significant dine-in business model often posted larger gains than quick-service restaurants, which frequently saw modest stock market gains or even slight losses in trading today. Restaurant Brands International (NYSE: QSR) gained just 0.02%, for example, while McDonald's Corporation (NYSE: MCD) lost 0.73% of its value. Another loser was food delivery service Grubhub (NYSE: GRUB), which sank 2.05%.

A waiter with a face mask and gloves and a woman ordering on a tablet in a restaurant

Image source: Getty Images.

A quick, cheap COVID-19 test capable of being rapidly administered to millions of people, and providing same-day results, could benefit the dine-in restaurant sector in several ways. Such a test offers the possibility of rapid, complete containment of the pandemic as the infected are quarantined and the healthy are "cleared" to resume normal work, dining, entertainment, and other activities. Even if this scenario doesn't fully play out and the coronavirus continues to spread at a reduced level, a cheap, fast test could theoretically facilitate testing of restaurant personnel on arrival if enough tests are made available, allowing ongoing assurance of service staff health.

According to Fast Company, Abbott's test cards work rapidly because they detect proteins from the virus' outer shell rather than requiring DNA analysis. The same source quotes Abbott as claiming the test is 97.1% to 98.5% accurate. The Chicago Business Journal adds the Trump administration is expected to order 150 million test cards, providing Abbott with a $750 million up-front order and enabling further production of its breakthrough technology.

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Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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