Is Fulgent Genetics Stock A Buy?

Is Fulgent Genetics stock a Buy? Fulgent Genetics Inc (NASDAQ:FLGT) is a clinical genetics testing provider that can perform over 800 tests across 18,000 genes. This includes an at-home COVID-19 test that sparked an avalanche of media buzz, although it can also test for cancers and other rare and genetic diseases.

The pandemic will eventually subside, and the economy will recover. But vaccine distribution is a key ingredient in that. Everyone in the world is aware of COVID-19, and at-home tests are a great way to enter the market when the public has been conditioned to embrace social distancing and may wish to avoid crowded testing centers.

Whether you believe in the efficacy of vaccines won’t stop you from taking a test for the virus. And there are plenty of other uses for genetic testing. Of course, rivals like 23andMe and Ancestry already have their feet dug into the consumer-facing side.

Will Fulgent Genetics produce positive returns for investors or leave their portfolios in the negative?

Fulgent Genetics Solves A BIG Problem

Fulgent Genetics is a healthcare technology company that provides a wide range of genetic tests. Its labs are capable of running RNA and DNA tests to find specific genetic defects identified in people suffering from certain diseases.

COVID-19 is one of these diseases – the coronavirus is a protein that attaches to our RNA and replicates. This leaves traces in both sick and recovered patients that can be extracted from saliva.

The ability to perform these tests at home is a big boon. People are quarantined at home and aren’t keen to line up outside of clinics to risk catching something just to find out if you had it in the first place.

It partnered with multiple municipalities, including New York City, to provide the tests for public employees. Essential workers often have strict testing requirements, and they may be tested daily, versus the average person who may only be tested once.

But COVID isn’t the only disease it can detect. Everything from cancer to Alzheimer has a genetic signature. Understanding our genetic risk factors is a key ingredient to living a long and healthy life.

This has some bullish investors wondering if Fulgent Genetics is a worthwhile investment.

Is Fulgent Genetics Stock A Buy?

Fulgent’s management predicts $523 million in revenues for 2021, and certainly has the potential to meet or even exceed this top line target due to unprecedented demand from the public.

Analysts agree, as the vaccine rollout is the most important news happening in the year.

The bulls set price targets in the $100-$130 price range, while bears go as low as $40.00 per share. That broad range highlights how many directions this market can go and the risks of investing in this stock.

The common factor both appear to agree on is volatility. That makes it difficult to buy the company’s stock at one moment in time. Instead, it makes more sense to acquire a stake over time. As FLGT share price bobbles up and down, a dollar cost averaging approach makes most sense to lower risk.

Will Fulgent Genetics Stock Be Capped By Demand?

Some investors have a sour taste in their mouths for medical testing companies following the scandals around Theranos. This $9 billion disaster promised easy clinical test results that proved beyond the laws of physics.

Fulgent’s genetics testing at least has science on its side, but the pandemic has revealed that only 60 percent of Americans are willing to get COVID vaccinated. Many think it’s a hoax, and this presents a problem for the company’s growth prospects.

Of course, coronaviruses aren’t the only genetic defects killing us. In fact, genetic testing is rising in popularity, as more people want to understand their full medical history. Mandatory tests aside, genetic testing has an abundance of potential benefits.

Except fewer people went to the hospital for routine checkups and other proactive care needs during the pandemic. Management will need to find ways to get people more curious about at-home tests if it wants to succeed long-term.

And that’s where it has the stiffest competition.

Competitors Also Offer At-Home Test Kits

Both 23andMe and AncestryHealth are in the consumer genetics game with very different approaches. Ancestry worked on the backend with clinicians, while 23andMe sold directly to consumers with FDA approval.

It’s unclear why neither company immediately jumped on the Covid pandemic. In fact, Ancestry discontinued its AncestryHealth product barely a year after launch. Meanwhile, 23andMe is going public with a $3.5 billion valuation.

Currently, it is unclear which of these two brands will succeed in a post-pandemic world.

Until then, Fulgent is competing with companies like Abbott, BD, Biomerieux, and Qiagen to produce and distribute as many COVID-19 tests as fast as possible. It’s a race to be first to win the branding battle in the minds of the public as the go-to testing kit.

Is Fulgent Genetics Stock A Buy? The Bottom Line

Fulgent Genetics was just another genetics testing technology company until the pandemic hit. It quickly pivoted to focus on the lucrative niche of at-home coronavirus testing. This generated huge revenues and pushed the stock up to triple digits in 2021.

But those gains may be short lived – the pandemic is likely to eventually subside, and Fulgent needs to raise consumer and clinician interest in other genetic diseases.

Running a full range of DNA and RNA tests is more difficult than it sounds. It’s a technology-intensive process that could also suffer from the shortage of semiconductors the pandemic caused. If Fulgent can use this foot in the door to upsell the rest of its tests, it could be a winning bet for its investors.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.