Shares of Quest Diagnostics (NYSE: DGX) were jumping 4% as of 11:07 a.m. EST on Friday after rising as much as 6.7% earlier in the day. The gain came after Citigroup analyst Ralph Giacobbe raised the price target on the stock from $151 to $158. The higher target reflects a premium of nearly 28% to Quest's closing price on Thursday.
It's usually best to take Wall Street analysts' price target changes with a grain of salt. No one really knows how much a stock will move in the future. However, it's good to understand analysts' thought process.
In this case, Giacobbe is more optimistic about Quest's prospects after COVID-19 testing growth tapers off. He thinks that the company could still win over the long term even if its reimbursement for COVID-19 testing declines.
Giacobbe is probably right about Quest's long-term potential. However, it seems possible that the healthcare stock could suffer more than he expects if COVID-19 testing falls off significantly this year. Quest has performed more COVID-19 molecular and serology tests than any other provider.
Quest Diagnostics will announce its fourth-quarter and full-year 2020 results on Feb. 4. The company's guidance in December projected full-year revenue of at least $9.35 billion with adjusted earnings per share of at least $10.75.
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