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Which Stocks Are the Biggest Losers From Sinking COVID Testing Rates?

By Keith Speights and Brian Orelli, PhD - Apr 22, 2021 at 7:01AM

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Less COVID-19 testing means less revenue for some companies.

COVID-19 testing rates are sinking significantly. While that could be good news in one sense, it could also be bad news for companies that offer COVID-19 diagnostics tests. In this Motley Fool Live video recorded on April 14, 2021, Motley Fool contributors Keith Speights and Brian Orelli discuss which stocks could be the biggest losers from this trend.

Keith Speights: Now I came across another story recently, and in some ways it's surprising. While increasingly more Americans are receiving COVID-19 vaccines, the rates of COVID testing are falling pretty significantly in the United States.

I looked at the Johns Hopkins coronavirus resource center tracking site, and there's been a significant decline in recent weeks in COVID testing rates. Brian, what do you make of this, first of all, and secondly, which stocks do you think could be the biggest losers from this sinking COVID-19 testing rates?

Brian Orelli: I think we were at about a million tests a day right now, and that's down from a high of 2.3 million tests in mid-January, so we're at less than half of the peak. I think it probably depends on what types of tests are being performed, are these general surveillance tests versus somebody who's symptomatic and we're trying to figure whether they have COVID-19 or they have something else.

For something like a general surveillance, I think Fulgent Genetics (FLGT 1.82%), they have a lot of large contracts for general surveillance. So I think if that type of test is going down, Fulgent's going to be heard.

A company like Quidel (QDEL), who's more likely to have its machines in a doctor's office, so I would imagine those are mostly going to be symptomatic tests. You go to the doctor and are sick and the doctor tries to figure out whether you have COVID-19 or the flu. I think that's probably the biggest question mark that I have, is which type of test is the one that's going down.

You can imagine that surveillance might stick around a little bit longer than symptomatic, but also people are sick from other things, even if they're not getting COVID-19, they may still get the COVID-19 test because you have flu-like symptoms or COVID-19 like symptoms, and so the doctor has to rule out COVID-19.

Even if the rate of COVID-19 goes down, those people might still get tested. Obviously, there's plenty of other test makers, Abbott (ABT 1.45%) comes to mind, Becton, Dickenson (BDX 2.14%). But those are all really large companies, and so I think the effect of losing out on sales of COVID-19 tests is probably not going to hurt them so much.

Keith Speights: The tickers, by the way, actually I just saw, Brian, you sent them out. Abbott and Becton and Dickinson, ABT and BDX there.

I think we may be getting a glimpse of the future here. The extremely high rates of COVID-19 testing were not going to continue indefinitely, and so they were bound to fall off. They're falling off sooner than I thought they would, but I would anticipate that going into 2022 and beyond that we're going to see quite smaller levels of testing rates. The companies that are best positioned for the long haul are going to be some of the big companies like you mentioned, like an Abbott Labs, I would think.

Orelli: Yeah. I agree.

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Stocks Mentioned

Abbott Laboratories Stock Quote
Abbott Laboratories
ABT
$110.22 (1.45%) $1.57
Becton, Dickinson and Company Stock Quote
Becton, Dickinson and Company
BDX
$251.80 (2.14%) $5.27
Quidel Corporation Stock Quote
Quidel Corporation
QDEL
Fulgent Genetics, Inc. Stock Quote
Fulgent Genetics, Inc.
FLGT
$55.52 (1.82%) $0.99

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

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