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Nasdaq Falls 40; Fulgent, Fluidigm Collapse on COVID-19 Competition

By Dan Caplinger – Aug 27, 2020 at 3:27PM

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The Nasdaq Composite failed to hit a record for the first time in a week.

The Nasdaq Composite (^IXIC 1.74%) has been the standout winner in the U.S. stock market so far in 2020, but it can't keep up the pace every single day. With market participants paying close attention to the Federal Reserve's latest pronouncement on how it intends to manage monetary policy, the blue chip stocks in the Dow Jones Industrials found themselves in the ascendancy on Thursday. After trying to eke out a small gain, the Nasdaq got stuck in the red by the end of the day.

The COVID-19 pandemic has been a source of great difficulty throughout the business world, but it's also given some companies an opportunity to show what they can do to solve medical problems. Both Fulgent Genetics (FLGT -0.89%) and Fluidigm (FLDM -2.27%) have enjoyed huge gains this year because of their roles in helping to evaluate coronavirus patients. However, both companies fell sharply today in the face of new competition.

Failing the test

Both stocks were sharply lower on Thursday. Fluidigm's losses amounted to 27%, while Fulgent took a 28% hit.

$100 bill with Ben Franklin wearing a mask.

Image source: Getty Images.

The source of the bad news for both companies was Abbott Laboratories (ABT 2.27%). The healthcare giant unveiled a new mass-market test for COVID-19, boasting its low $5 cost and its quick 15-minute results. That upped the ante for the standard of care for testing, and it'll require both Fluidigm and Fulgent to show that their own test products can make the grade.

A quick reversal for Fluidigm

The decline in Fluidigm shares comes just a day after the stock soared on its own news. Early Wednesday, Fluidigm found out that its saliva-based COVID-19 test had received emergency use authorization from the FDA. Investors and patients alike were ecstatic about an acceptable test that would avoid the uncomfortable nasal swabs that have become infamous among those tested.

That sent the share price up 30% Wednesday. After Thursday's drop, Fluidigm's share price is right back where it was trading on Monday before the flurry of news.

Yet even before Abbott's news, some had been nervous about competition for Fluidigm. A diagnostic test from the Yale School of Public Health came with a $10 price and got FDA emergency use authorization of its own. Other healthcare stocks  have also been exploring testing alternatives.

Threatening Fulgent's growth

Meanwhile, the news had even more immediate implications for Fulgent. The company has seen its revenue soar because of the demand for COVID-19 tests, and in its most recent quarterly report, Fulgent set a high bar for its expectations of rising testing volume.

At this point, there's more than enough demand for COVID-19 testing to leave room for just about everyone in the industry. It'll take time for Abbott to ramp up availability of its test, and in the meantime, health professionals won't hesitate to use whatever capacity Fulgent, Fluidigm, and others can provide.

In the long run, though, there will probably be winners and losers. Early reports indicate that the federal government has already agreed to spend $750 million to purchase 150 million of Abbott's rapid tests. It won't necessarily take orders of that size to move the needle at much smaller companies like Fulgent and Fluidigm. However, some of the gains in those stocks have come from taking commanding market share. With complete dominance likely off the table, investors will have to take more realistic views on how Fulgent and Fluidigm can grow from here.

Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Fulgent Genetics, Inc. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Fluidigm Corporation Stock Quote
Fluidigm Corporation
$1.07 (-2.27%) $0.03
Fulgent Genetics, Inc. Stock Quote
Fulgent Genetics, Inc.
$37.78 (-0.89%) $0.34
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
$10,759.54 (1.74%) $183.92
Abbott Laboratories Stock Quote
Abbott Laboratories
$98.96 (2.27%) $2.20

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

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