Fulgent Genetics (FLGT 5.74%) has been a six-bagger over the past 12 months. Why is the stock running so high?Healthcare and Cannabis Bureau Chief Corinne Cardina and Fool contributor Taylor Carmichael discuss the bullish case for Fulgent Genetics. This segment was recorded live on Feb 19.
Corinne Cardina: Let's move on to No. 3. This is the tiniest stock of the three we're talking about. It is Fulgent Genetics, $3 billion dollar market cap. It's a genetic testing company that offers more than 18,000 single-gene tests and more than 800 tests for rare diseases. They also do whole genome sequencing. Stock is up almost 600% over the past year. It's especially run up since January. Can you tell us a couple of good things or green flags with Fulgent Genetics?
Taylor Carmichael: I'm impressed with their management. They have very smart founder/CEO. I think, both positive and negative is, almost all of their revenue right now is COVID-19 related. They have a COVID-19 at-home test, which is very strong revenue growth driver right now, where you can test at home for COVID. Testing is very important, because you can have symptoms, you can have a hacking cough and you don't know, "Do I have COVID or do I have a cold?" You can have a fever and you don't know, "Do I have a flu or do I have COVID?" There are people who want to know what they have. Fulgent's tests are very high-end. These are very specific and very good genetic tests. So it's not just a nasal swab. This is a very high-end diagnostic test and very reliable diagnostic test, but out of these three companies that we named, I think Fulgent is the most likely to have a bit of a near-term hit. We don't know if the vaccination is going to wipe out COVID, one and done, that would be wonderful. I don't think it's going to happen. Or if we're going to have just an ongoing thing that we vaccinate every year. If it's an ongoing thing, if we have to do this again next year, and the year after, and the year after, Fulgent is going to be an amazing stock and they're going to do really well, just on COVID they're going to do really well. But I'm hopeful, if we eliminate COVID-19, then the near term Fulgent is going to take a big hit because almost all of their revenues are coming from COVID right now. They shifted to COVID and just jumped their revenue. That's why I like their CEO so much. He was able to make that shift. They do diagnostics for things like cancer. They have a widespread diagnostic program and they're doing a lot of genetic testing across the board. They're a very diverse company in terms of their capabilities, but right now all the revenues are COVID related. So it's extremely a COVID stock. Their numbers are incredible. They have incredible revenue growth. They have incredible profit margins. They're just printing money right now.
Cardina: If you look at what they were doing before COVID, that might be a little bit of a hint for what it could look like down the road, and I'll just mention, in the first quarter of 2020, before the pandemic was truly a pandemic in the U.S., its revenue was up 44% year over year, mostly on testing volumes. So they're increasing their volume. Of course, now, like you said, with COVID, third-quarter revenue was up 880%. So, huge difference, but they were still chugging along in their main business before the pandemic really happened.
10 stocks we like better than Fulgent Genetics, Inc.
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Fulgent Genetics, Inc. wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of November 20, 2020