What happened
Shares of the molecular diagnostic company Co-Diagnostics (CODX -0.43%) 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.
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.
