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What's Causing the Huge Run-up for Fulgent Genetics Stock?

By Danny Vena, Keith Speights, and Jason Hall - Feb 12, 2021 at 8:00AM

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After a stellar 2020, the genetic testing specialist is starting off this year with a bang.

Fulgent Genetics (FLGT 1.57%) was one of the undisputed winners last year, gaining a massive 300%. If you think that was impressive, consider this: the stock has already gained more than 200% in 2021, with no signs of slowing. So what's causing this huge run-up?

On this clip from Motley Fool Live, recorded on Feb. 1, "The Wrap" host Jason Hall and contributors Danny Vena and Keith Speights look at what's driving Fulgent's significant gains.

Jason Hall: From Becoming Fearful, "Fulgent Genetics stock had a huge run today." SK asking, "What's going on?" What can you tell us?

Keith Speights: To be honest, I haven't followed what's going on with Fulgent today, but just one thing to keep in mind with Fulgent is that it has a high short interest, which means it is a good candidate for short squeeze and we could be seeing that play out today. I think it's up around 25%. You were about to say something Jason?

Jason Hall: You froze for just a second, but you're good. Keep rolling it out.

Keith Speights: Yeah. I think we might be seeing some of the GameStop (GME -0.03%) phenomenon happening with Fulgent Genetics. It has high short interest and I think we're seeing some short-sellers really starting to cover their positions here. It could be some other news that I'm not aware of, but I suspect that's part of what we're seeing.

Jason Hall: You're saying we should all go to r/wallstreetbets on Reddit and figure out what's going on there, might be a good idea. But here's the thing, too: This is a company that had a market cap of less than $1.5 billion six weeks ago.

Keith Speights: Yeah.

Jason Hall: When you combine that with a lot of interest, you can get these big skyrocketing results. Factor in the short squeeze on top of that and boom, here we go.

Keith Speights: On Fulgent there's a contrarian angle to it that maybe their fortunes won't be as great this year because of what we were just talking about. If we reach herd immunity, the vaccines become more widely available, maybe there's not as much of that need for COVID testing and so there is that bare argument for Fulgent. I think they're going to be fine this year, but this big jump might not be totally justified. The main catalyst today was price target raise. Oppenheimer came out and they bought their price target up from $75 a share, which was way behind, to $130.

Jason Hall: Which is still about $7.5 below the current share price?

Keith Speights: Yeah. [laughs] They're still not keeping up with how fast it's moving. Again, I think that was the catalyst. That was the spark but you are seeing short-sellers get out of the way.

Jason Hall: Getting squeezed on that and here's the thing. An analyst price target changes, not a material event for the company. It can be material for investors as we experience today. But yeah, that's good, Keith. Thanks for that.

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