What happened

Co-Diagnostics (NASDAQ:CODX) stock soared 58.7% in May, according to data from S&P Global Market Intelligence. For context, the S&P 500 returned about 4.8% last month.

Shares of the healthcare diagnostics specialist, however, gave back some of May's fat gain during the first week of June. Last week, the stock fell 11.2%, while the S&P 500 was up nearly 5%.

Co-Diagnostics stock remains a massive winner this year. In 2020, it's up 1,690% through Friday, making it nearly an 18-bagger! By comparison, the S&P 500 has almost recovered from its earlier plunge, but is a hair shy of breakeven for the period.

A gloved hand holding a vial of blood labeled "coronavirus" with "no" checked (instead of "yes")

Image source: Getty Images.

So what

We can attribute Co-Diagnostics stock's powerful May performance largely to a continuation of the momentum it's had since mid-April, when the company announced that its Logix Smart COVID-19 testing technology had been validated by OralDNA Labs for use on saliva samples. (OralDNA Labs is certified under Clinical Laboratory Improvement Amendments under the Food and Drug Administration's Emergency Use Authorization program.) 

CODX Chart

Data by YCharts.

That said, there were also some specific catalysts last month that moved the stock, as the above chart shows.

May 4: Shares popped 11.4% after the company announced that its Logix Smart and Saragene COVID-19 tests were approved in Mexico and India, respectively. The latter test is made by its CoSara joint venture. 

May 13: Shares skyrocketed nearly 38%, which we can attribute to what many investors viewed as a potential setback for a competitor's rapid COVID-19 test. A study conducted at New York University's Langone Tisch Hospital found that Abbott Labs' (NYSE:ABT) ID NOW test missed up to 48% of positive results, according to MassDevice. 

May 15: Shares gave back their entire May 13 gain. We can probably attribute this at least in part to investors being satisfied with Abbott's May 14 response to the Langone study (that it was "not consistent with other studies"), or at least to many investors believing that sales of Co-Diagnostics' COVID-19 test wouldn't get that significant of a boost from the Abbott news. 

Moving our time lens out beyond just one month, here's Co-Diagnostics stock chart for 2020 so far:

CODX Chart

Data by YCharts.

Now what

Co-Diagnostics isn't profitable yet. However, Wall Street expects the company to be profitable, at least on an adjusted basis, for the full year. That's due, of course, to its tremendous revenue growth stemming from the COVID-19 pandemic.

In 2020, analysts are modeling for adjusted earnings per share of $2.06 on revenue of $93.5 million. Last year, the company posted a loss of $0.36 per share on sales of $215,000. 

Investors need to be careful when investing in the COVID-19 testing space because it's highly competitive and eventually, at least, demand for tests should subside considerably.

Indeed, in 2021, analysts expect Co-Diagnostics' growth engine to sputter. They're projecting revenue will rise just 7% year over year and earnings will be flat with 2020. 

Of course, there's much uncertainty surrounding the pandemic, so a lot can change quickly.

The bottom line is that if you want to invest in the COVID-19 testing space, you should be willing to put in the time required to keep very up to date with developments in this realm. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.