After competitor Abbott Labs (NYSE: ABT) unveiled a $5, 15-minute COVID-19 test, shares of Fulgent Genetics (NASDAQ: FLGT) are tumbling 28.7% at 11:15 a.m. EDT on Thursday.
Fulgent Genetics' bread-and-butter business is providing genetic testing for cancer patients and would-be parents. However, management pivoted earlier this year to provide COVID-19 testing, too, and that's caused revenue and the company's share price to soar.
In Q2, sales surged 105% year over year to $17.3 million because of significant COVID-19 test demand, resulting in adjusted earnings per share of $0.17, which was $0.19 better than industry watchers' forecast. The healthcare company delivered 180,513 billable tests in the period, up more than 1,003% from the same quarter last year.
The company's test volume continued increasing in the third quarter, too. During Fulgent Genetics second-quarter conference call in July, management said it expects quarterly testing volume to increase from about 180,000 in Q2 to over 700,000. Earlier this month, it increased its full-year sales outlook to $135 million from $120 million, previously.
The growth forecast could be temporary, though. On Thursday, healthcare-giant Abbott Labs announced that it's releasing a 15-minute COVID-19 test using a nasal swab and a reactive card that will cost just $5 per test. Fulgent Genetics' turnaround time from receiving the sample to results is 24 hours, and its cost is higher, with management charging $39 out of pocket for its at-home test.
A faster, cheaper testing alternative could reduce the spread of COVID-19 and help businesses return to normal operations. However, a previous Abbott Labs test drew criticism over potential false positives, so investors will want to wait and see how the test performs following its launch.
If Abbott's launch is successful, government and corporate clients could shift away from Fulgent Genetics' testing option, causing revenue to drop in future quarters. However, Fulgent Genetics' main business of genetic testing for cancer patients and parents-to-be has been negatively impacted by COVID-19 lockdowns, so demand for those services should benefit if widespread testing results in more people visiting doctors.
Overall, the genetic-testing market is expected to eclipse $10 billion by 2022 worldwide, so Fulgent Genetics' current sales suggest it has plenty of potential to produce meaningful revenue growth regardless of how the COVID-19 marketplace evolves.
10 stocks we like better than Fulgent Genetics, Inc.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Fulgent Genetics, Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of August 1, 2020
Todd Campbell owns shares of Fulgent Genetics, Inc. His clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Fulgent Genetics, Inc. 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.