Co-Diagnostics (CODX) was one of the best-performing stocks of 2020, but a fourth-quarter earnings report failed to impress investment banks that follow the molecular diagnostics company. The stock has been under pressure since Maxim downgraded the stock to hold, and H.C. Wainwright cut its price target on Co-Diagnostics by nearly half.

Is Co-Diagnostics a good stock to buy on the dip, or should you remain cautious?

Investor pondering in front of her computer.

Image source: Getty Images.

The most important thing to remember about this company is that it currently relies on COVID-19 testing for nearly all revenue. Unfortunately, cash flows from coronavirus testing have probably peaked.

Despite having access to public markets since its initial public offering (IPO) in 2017, last year was the first time that Co-Diagnostics was able to report an annual profit. After earning around $42 million in 2020, expectations for 2021 are significantly lower, and there isn't another hit diagnostic test ready to take over.

Although it gave up around 40% of its value over the past week, Co-Diagnostics still boasts a $250 million market cap at recent prices. That's an awful lot to pay for a company without a significant revenue source to lean on once the demand for COVID-19 tests falls off a cliff. 

Co-Diagnostics' proprietary technology platform is positioned to play a big role in the market for molecular diagnostics, but this is a hypercompetitive industry. It's probably best to wait and see if this company can achieve post-pandemic profitability before adding this risky stock to your portfolio.