Please ensure Javascript is enabled for purposes of website accessibility

Why Co-Diagnostics Stock Is Crashing Today

By George Budwell - Updated Mar 3, 2020 at 10:08AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Shares are taking a breather following a downgrade by an analyst at Maxim Group.

What happened

Shares of the molecular diagnostic company Co-Diagnostics (CODX -2.59%) are getting hammered this morning. The stock is down by 18.3%, as of 10 a.m. EST Tuesday morning. 

What's spooking investors today? Ahead of the opening bell, Maxim Group analyst Jason McCarthy downgraded Co-Diagnostics' stock over valuation concerns. 

A man getting punched in the face.

Image source: Getty Images.

So what

McCarthy's bearish view does seem to have solid reasoning behind it. Co-Diagnostics' shares were up by a breathtaking 1,890% since Jan. 1 -- that is, prior to today's double-digit pullback. What's been launching this small-cap growth stock into the stratosphere this year?

Investors have been piling into this name in early 2020 in response to the company's rapid development of a molecular diagnostic test for the COVID-19 coronavirus. Although this much-needed test should turn out to be a healthy revenue generator for the company, the fact is that most, if not all, of this upside potential is likely already baked into Co-Diagnostics' valuation at this point. 

Now what

Should bargain hunters consider stepping in on this hefty downturn? The short answer is probably not. No one really knows how much revenue this molecular diagnostic test will ultimately generate for the company. As such, there's no accurate way to properly quantify what a fair valuation for this stock should look like, and that's simply not a favorable setup for either value or growth investors.  

George Budwell 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.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Co-Diagnostics, Inc. Stock Quote
Co-Diagnostics, Inc.
CODX
$3.76 (-2.59%) $0.10

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
394%
 
S&P 500 Returns
127%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/19/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.