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Why Quidel Stock Jumped Today

By Jon Quast - May 7, 2021 at 1:58PM

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Investors rewarded the stock for triple-digit growth, but the market remains unsure about the remainder of 2021.

What happened

Shares of Quidel Corporation (QDEL) jumped on Friday morning after the company reported blistering-hot growth for the first quarter of 2021. The company didn't quite hit expectations for the quarter. But the stock was down over 65% from 52-week highs going into the Q1 earnings release, providing a depressed price per share to bounce higher from. As of 1:20 p.m. EST, Quidel stock was up 12%.

So what

It seems almost every metric was up triple digits for Quidel in Q1. Total revenue was up 115% year over year to $375 million, as its test kits for the coronavirus are still in high demand. In fact, these COVID-19 test kits accounted for almost 75% of revenue in Q1. This surge in sales created operating leverage resulting in a whopping $585 million in operating cash flow for the quarter. For perspective, this stock has a market cap just barely over $5 billion.

A businesswoman draws a growth curve on a bar chart displayed on a transparent touchscreen.

Image source: Getty Images.

Now what

When examining Quidel stock using backwards-looking valuation metrics, it's undeniably cheap. Yet, at least some analysts think it could go down further even though it's already down around 60% from previous highs. For example, following the Q1 report, an analyst with J.P. Morgan lowered their price target for Quidel stock from $95 per share to $90 per share, according to The Fly. That's roughly 25% more downside from where the stock trades right now.

Why isn't the market gobbling up shares of this value stock? The simple answer is investors have no idea what to expect in 2021. Management isn't giving guidance because there's so many unknowns right now. In fact, while handling the subject of future revenue on the Q1 conference call, CEO Douglas Bryant said, "it's not forecastable."

Therefore, Quidel stock remains cheap while investors worry about potential shortcomings in 2021. However, the company has approval for at-home test kits, is partnering with businesses to get employees back to the office, and could even support things like sporting events in stadiums as our world returns to normal. Therefore, there's plenty of potential revenue drivers in the coming year, even if these catalysts aren't forecastable right now. 

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Jon Quast has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Quidel. The Motley Fool has a disclosure policy.

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