Shares of Fulgent Genetics (NASDAQ:FLGT) soared nearly 31% at one point Friday morning. However, the stock was up only 5% as of 11 a.m. EST.
That huge, albeit temporary, gain stemmed from Fulgent's fourth-quarter update after the market close on Thursday. The genetic testing company reported revenue of $295 million with adjusted earnings of $167.5 million, or $6.20 per share. Both top- and bottom-line results represented huge improvements from the prior-year period and trounced Wall Street consensus estimates. Fulgent also provided 2021 guidance that projects 90% revenue growth this year.
Fulgent delivered jaw-dropping growth. It blew past analyst expectations. The company's guidance was terrific. It's understandable why shares would jump as they did earlier today. But why did the healthcare stock give up most of its gains? It's probably because investors aren't convinced the growth is sustainable.
Most of Fulgent's tremendous revenue increase came from its COVID-19 testing business. Based on the company's guidance, this business should enjoy strong demand in 2021. However, there's a big question as to how long it will last.
As COVID-19 vaccines become more widely available, the pandemic could come to an end. While investors are excited about Fulgent's Q4 results, many of them probably also worry that the company's growth could taper off dramatically in the not-too-distant future.
One key thing to watch with Fulgent going forward is the growth in its non-COVID-19 business. The company said that its non-COVID-19 genetic testing revenue jumped 43% year over year in Q4.
It's also possible that concerns about a steep decline in COVID-19 testing could be premature. The emergence of new coronavirus variants could mean that Fulgent Genetics' COVID-19 revenue will remain strong for a long time to come.