Quidel, Abbott, Quest: Why Covid-19 Testing Stocks Are Still Worth A Look

Our indicative theme of Covid-19 Testing Stocks– which includes the stocks of companies that produce or carry out tests for the highly infectious virus – is up by about 51% year-to-date, on an equally weighted basis, compared to the broader S&P 500 which is up around 15%. While the conversation (and investor interest) has mostly shifted to the Covid-19 vaccine, after stellar efficacy results from Pfizer (NYSE: PFE) and Moderna (NASDAQ: MRNA) vaccine candidates, testing stocks might still be worth a look for a couple of reasons.

Firstly, Covid-19 cases continue to surge in developed countries such as Europe and the U.S. and this should continue to drive demand for testing. Covid tests are also generally recurring in nature, with people often requiring multiple tests over a period of time. While vaccines are already being administered in limited numbers, it could take as long as 2022 or later for the global population to be vaccinated. Until then, testing will remain key to maintaining normalcy and keeping the economy open. Moreover, testing companies should continue to benefit post-Covid as well. While companies such as Abbott Laboratories (NYSE:ABT) and Quidel (NASDAQ:QDEL) are well-diversified, offering a range of medical devices or diagnostic products which will continue to drive growth, the likes of Quest Diagnostics (NYSE:DGX) and Laboratory of America (NYSE:LH) should see their core testing and diagnostic operations, which were impacted through Covid, pick up.

Quidel, a company that makes diagnostic products for infectious diseases and other conditions, has been the biggest winner in our theme, rising by about 158% year-to-date. The company offers a range of Covid tests, including a test that can detect both influenza and coronavirus. On the other side, Quest Diagnostics has underperformed, rising by just about 15% year-to-date, as its general diagnostic business has proved a mixed bag as doctors’ visits declined through the pandemic. See our theme Covid-19 Testing Stocks for more details.

[Updated 11/3/2020] Quidel, Abbott, Quest: Testing Stocks To Watch As Covid-19 Cases Surge

Our indicative theme of Covid-19 Testing Stocks, which includes medical device and diagnostic companies that are involved in Covid-19 testing – is up by about 66% year-to-date, significantly outperforming the S&P 500 which has gained about 3% over the same period. Covid-19 testing stocks could be a relatively safe way for investors to play the containment of the pandemic in the near-term, considering that companies are already generating revenue from tests, unlike vaccine stocks – which are still in the trial phases and Covid therapeutics which have shown relatively mixed efficacy thus far.

Moreover, demand for testing is likely to rise with the coming holiday season, as Coronavirus cases continue to surge in the U.S. and Europe. For example, as travel picks up, testing will be key to improving confidence for passengers while potentially helping to reduce quarantine restrictions. Within our theme, Quidel (NASDAQ: QDEL) has been the strongest performer gaining about 231% year-to-date, while Quest Diagnostics (NYSE:DGX), up about 17%, was the weakest performer. Below is a bit more about these companies.

Quidel (QDEL) is a company that sells diagnostic healthcare products including rapid diagnostic testing solutions, cellular-based virology assays, and molecular diagnostic systems. The company doubled down on the Covid-19 testing over the last two quarters, and its stock is up a solid 230% this year.

Hologic (HOLX) sells medical devices for diagnostics, surgery, and medical imaging.  The company currently has two molecular diagnostic tests for Covid-19 including the Panther Fusion and Aptima tests. The stock is up by about 35% year-to-date.

Abbott Laboratories (ABT) has a diverse range of solutions including a test called BinaxNOW that provides test results in fifteen minutes and works without relying on lab equipment. The stock is up by about 24% year-to-date.

Laboratory of America (LH) operates one of the largest clinical laboratory networks in the world.  While the company’s general diagnostic business has proved a mixed bag as doctors’ visits declined due to the pandemic, it has scaled up the capacity and accessibility for Covid-19 tests. The stock is up by about 22% year-to-date.

Quest Diagnostics (DGX) is one of the largest U.S. diagnostics chains. While the company has been impacted by the pandemic, its large-scale Covid-19 testing has compensated for this to an extent. The stock is up by 17% year-to-date.

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