Over the past year, shares of Fulgent Genetics (NASDAQ:FLGT) have skyrocketed over 970%, reaching an all-time high of $189.89 on Feb. 7. Since then, however, the COVID-19 test manufacturer has seen its stock price plunge by almost 35%. What could possibly be behind such wild trading action? 

As it turns out, many investors are starting to see Fulgent Genetics as a one-time fad that got rich in 2020 for doing its part in fighting the coronavirus pandemic, and is about to fall back to reality as the risks posed by the virus subside. Can investors count on the biotech to continue delivering multibagger returns, or is Fulgent Genetics' growth story over?

Scientist conducting tests in a laboratory.

Image source: Getty Images.

The end is near

Last year, Fulgent increased its revenue and net income to $421.7 million and $214.3 million, respectively. Both are astonishing increases over just $32.5 million in sales and negative $0.4 million in net income from 2019. In the fourth quarter of 2020, Fulgent delivered more than 3.2 million billable tests, which is about 230 times the volume that it delivered in Q4 2019.

The company is now the No. 1 provider of COVID-19 testing in California. Its tests are 99.9% accurate, cost as little as $100 without insurance, and return results in one or two days.

It also has multiple contracts with large corps, testing organizations, sports teams, conferences, cruise lines, nursing homes, and the New York City Department of Education. Fulgent expects revenue will increase by 90% annually this year to $800 million, and its earnings per share will increase from $8.91 to $12.50.

All that spectacular growth, however, will probably be gone by 2022. After all, the Biden administration is on track to have every American adult vaccinated by the end of July. There will be no need for drive-thru testing centers when everyone has received a vaccine, and Fulgent's revenue will -- at least for a time -- collapse.

Fulgent's core business should bear fruit

Fortunately for Fulgent, it has its core business to fall back on. The diagnostics for hereditary cancer, cardiovascular disease, cancer, and neurodegenerative disease could bring up to $70 million in sales this year. This segment only saw about 60,000 tests before the pandemic began, far below that of its coronavirus diagnostics capacity that brought more than $300 million in revenue in 2020. The company also plans to roll out its pharmacogenomic test, which measures the rate of patients' metabolism based on 44 genes and in response to 140 drugs.

What's more; the company signed up 15 new contracts for its non-COVID testing services in Q4 2020. The firm now offers more than 19,000 genetic tests, which is one of the largest selections on the market. Previously, Fulgent planned a large-scale launch of its new genetics business, but that was delayed as the COVID-19 pandemic forced many patients to delay discretionary diagnostic tests. Now that the pandemic is near its end, the company stands to make a great deal of profit by clearing such testing backlog. 

Is it still a millionaire-maker stock?  

Fulgent was one of four labs chosen to deliver coronavirus tests to the Department of Homeland Security over five years in a deal worth $2 billion. Since studies have shown that vaccinated individuals can still transmit the coronavirus, testing would still play a big role in preventing outbreaks of mutated strains or for national security purposes. So that contract will probably stand.

At the end of the day, Fulgent is probably one of the cheapest healthcare stocks out there are at only 12 times earnings. It is a solid buy for that reason, even given its looming drive-in testing sales collapse. Fulgent still has a tailwind from government coronavirus testing contracts, along with its core genome testing business to fall back on. 

But don't be fooled. The golden age of investing in Fulgent stock is pretty much over. While the company enriched many of its investors, I think it's too late for shares to make new investors into millionaires off a decent initial position of $10,000. I would instead buy and hold the stock for what it has to offer outside of its brief COVID-19 testing catalyst.  

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.