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What Investors Didn't Like About Co-Diagnostics' Q4 Update

By Keith Speights - Mar 26, 2021 at 6:00AM

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The company missed earnings expectations and hinted at slowing growth in 2021.

No one expected Co-Diagnostics (CODX 1.22%) to follow up its fantastic gain of nearly 940% in 2020 with anything close to that level this year. However, the molecular-diagnostics stock got off to a great start. The momentum is losing steam now, though.

Co-Diagnostics announced its fourth-quarter and full-year 2020 results after the market close on Thursday. The healthcare stock sank 8% in after-hours trading. Here are the highlights from the company's Q4 update.

COVID-19 Test test tube in gloved hands with person receiving the test in faded background.

Image source: Getty Images.

By the numbers

Co-Diagnostics reported revenue in the fourth quarter of $27.1 million, up 24% quarter over quarter. This result topped the average analyst revenue estimate of nearly $25 million.

The company announced Q4 net income of $12.8 million, or $0.43 per diluted share. This was lower than its Q3 earnings of $15.7 million, or $0.53 per diluted share. It also fell short of the consensus analyst estimate of earnings of $0.48 per share.

Co-Diagnostics ended the fourth quarter with cash, cash equivalents, and marketable securities totaling $47.3 million. 

Behind the numbers

One product generated most of Co-Diagnostics' revenue growth in Q4: The Logix Smart COVID-19 Test. The company received Emergency Use Authorization (EUA) for the test in April 2020. It's been a fun ride for Co-Diagnostics, for the most part, since then.

The problem for the company in the fourth quarter wasn't due to revenue challenges. Co-Diagnostics' spending increased significantly more than its revenue did. In the third quarter, the molecular-diagnostics company's operating expenses totaled nearly $4 million. Co-Diagnostics' operating expenses in Q4 jumped 70% higher to $6.8 million.

However, the company's gross profit margin increased quite a bit. In the fourth quarter, its gross profit margin stood at 84%, up from 73% in the previous quarter.

Looking ahead

What will 2021 look like for Co-Diagnostics? CEO Dwight Egan tried to manage expectations saying that, "COVID-19 test sales may not be as robust as in 2020." However, the company thinks that demand will continue for its COVID-19 tests and other products over the long run.

The company hopes to win an additional EUA for its Logix Smart direct saliva test. It also could benefit if new coronavirus variants spread, boosting demand for COVID-19 testing.

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