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These 2 Stocks Are Soaring Despite Another Market Plunge

By Dan Caplinger - Mar 4, 2021 at 5:40PM

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Strong earnings sent both of these healthcare stocks higher after hours on Thursday.

Stocks once again lost ground on Thursday, with many investors starting to worry more seriously about the potential for higher interest rates in the near future. The 10-year Treasury note yield climbed well above 1.5%, but Fed chair Jay Powell expressed no real concern about perceived inflationary pressures that could hurt the economy. Declines for the Dow Jones Industrial Average (^DJI -0.49%), S&P 500 (^GSPC -0.80%), and Nasdaq Composite (^IXIC -1.45%) were substantial, but the indexes finished well above their worst levels.


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Data source: Yahoo! Finance.

Investors got some positive news from a couple of companies after the closing bell, however. Fulgent Genetics (FLGT -2.57%) and T2 Biosystems (TTOO 1.28%) both moved sharply higher after reporting solid earnings results. Below, we'll go into more detail about these two biotech stocks.

Person in lab coat looking through microscope, in a lab with test tubes.

Image source: Getty Images.

Healthier than ever

Fulgent Genetics fell 8% in the regular session, but its stock had jumped 33% as of 5 p.m. EST in after-hours trading. The gene-testing specialist saw its strong performance continue into the fourth quarter of 2020 and expressed optimism in its outlook for 2021.

Fulgent posted record revenue of $295 million in the fourth quarter, which was up from just over $8 million in the prior-year period. Volumes of billable genetic tests jumped a whopping 230 times to 3.2 million, and Fulgent demonstrated that it could scale up production efficiently by boosting its gross margin by fully 26 percentage points.

Fulgent's success stemmed from its COVID-19 tests, and that had some investors concerned about the future once the pandemic is under control. But CEO Ming Hsieh was upbeat in assessing the opportunities for Fulgent, including expanded capabilities to track new mutations of the coronavirus, and its rollout of vaccine management software.

As a result, Fulgent expects first-quarter revenue of $325 million, with full-year 2021 sales anticipated to climb 90% to $800 million. That should lead to adjusted earnings of $12.50 per share, suddenly making Fulgent's earnings multiple look a lot more reasonable.

Another COVID-19 play scores a win

Elsewhere in nearly the same space, T2 Biosystems (TTOO 1.28%) moved higher by 6% after having been up as much as 21% earlier in the after-hours session. The reasons were quite similar to Fulgent's, although T2's expectations for 2021 weren't as high.

T2 saw revenue in the fourth quarter of 2020 soar 154% from year-earlier levels. Increased test panel and instrument sales were the primary contributor to performance, and strict cost controls were able to help the company narrow its losses by almost a third compared to the fourth quarter of 2019. For the full year, revenue more than doubled.

The big news for T2 was its determination that its T2SARS-CoV-2 testing panel could detect variants of the coronavirus. The company sold 21 of its T2Dx instruments in the fourth quarter, causing product revenue for the period to nearly quadruple year over year.

But T2 doesn't see the boom having as big an impact on its 2021 financials as Fulgent does. Projections for $24 million to $26 million in revenue would represent growth of just 33% to 44%, a considerable slowdown from 2020's blockbuster numbers. That might explain why the stock let up on the throttle as the after-hours session went on, but it still gives T2 a strong foundation on which to keep moving forward with its innovative medical diagnostic products.

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Stocks Mentioned

Fulgent Genetics, Inc. Stock Quote
Fulgent Genetics, Inc.
$53.05 (-2.57%) $-1.40
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
$32,038.05 (-0.49%) $-166.89
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
$3,991.70 (-0.80%) $-32.19
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
$11,633.85 (-1.45%) $-157.54
T2 Biosystems, Inc. Stock Quote
T2 Biosystems, Inc.
$0.23 (1.28%) $0.00

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

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