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Why Co-Diagnostics Stock Is Tanking Today

By Keith Speights – Aug 14, 2020 at 11:18AM

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Investors weren't happy with the molecular diagnostics company's Q2 results.

What happened

Shares of Co-Diagnostics (CODX 2.75%) were 22.8% lower as of 10:55 a.m. EDT on Friday. The big drop came after the molecular diagnostics company announced its second-quarter results following the market close on Thursday.

Co-Diagnostics reported revenue in Q2 of $24 million and net income of $12.6 million, or $0.46 per diluted share. While those results reflected significant improvement over the prior-year period, they fell far short of what analysts were expecting. The consensus analysts' estimate projected revenue of $26.5 million and earnings of $0.59 per share.

So what

Does it really matter that Co-Diagnostics badly missed analysts' estimates? Yes and no.

Hand holding magnifying glass with stock chart and coronavirus in the background

Image source: Getty Images.

Any quarterly results are only a snapshot of a company's performance. It's much more important for investors to focus on the long term. From this perspective, Co-Diagnostics' Q2 revenue and earnings disappointments aren't anything to get worked up about.

On the other hand, Co-Diagnostics has been a high-flying growth stock this year thanks to demand for its COVID-19 diagnostics tests. Prior to the plunge on Friday, the stock had skyrocketed more than 2,000% year to date. This kind of sizzling performance requires meeting and exceeding ever-rising expectations, which Co-Diagnostics failed to do in the second quarter.

Now what

There's a reasonably good chance that the stock could rebound from its pullback. Demand for the company's COVID-19 tests isn't likely to decline. Co-Diagnostics hopes to deploy new flu and COVID-19 test panels during the third quarter.

Its partner, Clinical Reference Laboratory, also received Food and Drug Administration Emergency Use Authorization for a saliva-based COVID-19 test that can be taken at home. This test uses Co-Diagnostics' Logix Smart and CoPrimer technology. This saliva-based test could boost sales in the second half of 2020.

Keith Speights 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.

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