Quidel Corporation (NASDAQ:QDEL) stock has been falling sharply in the past couple of months. In early August, the diagnostics and research stock hit a 52-week high of more than $300. But last week, shares of Quidel closed at less than $197. It’s been a rough couple of months for the stock.
Despite coming off a strong second quarter where sales of $201.8 million were up 86% year over year, the bullishness surrounding the stock has cooled off. Part of that was undoubtedly do to its high valuation, as Quidel still trades at more than 13 times its book value and a price-to-earnings multiple of more than 50. That’s a high valuation for a company that’s seeing its numbers surge from COVID-19 related testing – something that may not be sustainable over the long term.
The stock suffered a big hit on August 27 where trading volumes surged to more than 13 million (previously, less than one million shares were changing hands). The big reason the stock plunged more than 20% that day was that because Abbott Labs came out with a $5 rapid test that would deliver results in as little as 15 minutes while also giving people an affordable option, in what was called a "game changer."
If Abbott takes a big chunk of Quidel’s testing revenue, that could lead to softer growth numbers in future quarters, making the San Diego-based company look like less of a buy, especially at its high price tag.
However, with the coronavirus pandemic nowhere near ever, there may still be enough testing to keep Quidel busy, especially if a second wave hits. Given that its growth is likely to continue to be strong in future quarters, Quidel could be a good buy right now as investors may have overreacted to the news.
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