Have $ 1,000? It’s the best coronavirus stock to buy in October
Testing is a major part of beating the coronavirus crisis. If governments test as many people as possible, those who are sick or carry the virus can self-quarantine, preventing the virus from spreading. So investing in a company that already doesn’t have one – but six – coronavirus tests on the market is a good idea.
In just a few months, Abbott Laboratories (NYSE: ABT) has become a major player in the field of testing. The United States Food and Drug Administration (FDA) has granted each of Abbott’s tests an Emergency Use Clearance (EUA). If you have $ 1,000 to invest and are looking for a coronavirus stock to buy in October, Abbott is a great candidate. The company has started to generate revenue from its COVID-19 tests. And that is expected to continue as the United States attempts to contain the virus in the months to come.
Abbott entered the coronavirus scene in March, when the FDA granted EUA its first COVID-19 test. The test was to be performed on an Abbott device available at many hospitals in the United States. In this way, the analysis could be performed closer to the patient rather than in an outside laboratory.
Results in five minutes
Abbott followed up with a variety of other tests. The company has created a portable test that produces positive results in five minutes and negative results in 13 minutes. He introduced an antibody blood test to detect if a person has had COVID-19. And most recently, the FDA granted EUA for Abbott’s $ 5, 15 minutes antigen test. Due to its portability, low cost, and ease of use, this test facilitates mass testing across populations.
Sales of some of the tests have already contributed to Abbott’s diagnostic business. In the second quarter, Abbott’s COVID-19 testing generated $ 615 million in revenue. This did not include sales of the new antigen test, which received the EUA following the results report. But the initial income from that test may contribute to the third quarter report expected later this month. Abbott planned to ship millions of tests in September, the last month of the quarter.
The United States has performed more than 120 million COVID-19 tests as of October 7, according to data from the Centers for Disease Control and Prevention. This figure does not include antigen or antibody testing. It only includes lab tests that detect virus nucleic acids in a nasal swab sample. And that doesn’t specifically refer to Abbott’s testing. The FDA has granted 180 EUA COVID-19 molecular tests, according to a list on the regulatory agency’s website. Abbott clearly shares this market with others. But given the depth of the crisis, there should be room for plenty of players.
A boost for declining revenues
COVID-19 testing helped boost Abbott’s declining revenue during the crisis, as other lab tests and procedures with the company’s medical devices were postponed. Abbott announced a 5.4% drop in sales in the second quarter.
Now imagine the demand for COVID-19 testing decreases at some point in the future. This is not much of a problem for Abbott. Revenue from COVID-19 testing was only 8.4% of total revenue in the second quarter. And revenues for the rest of Abbott’s portfolio are sure to rebound from the recent downturn as labs and hospitals resume their usual activities. This means that Abbott will continue to generate most of its revenue from other tests as well as medical devices.
Abbott has increased revenue since 2013. But revenue really took off in 2017 with the acquisitions of St. Jude Medical and Alere Inc., which added medical devices and diagnostic strength, respectively. New product launches, including 12 in cardiovascular and more than 25 in nutrition, also drove growth.
Before the coronavirus pandemic, Abbott continued to deliver. For full year 2019, revenue grew 7.7% to over $ 31 billion. Sales increased in all lines of business, driven by medical devices with growth of 10.5%.
The coronavirus crisis is not over. But this is a temporary situation. While Abbott will benefit from ongoing COVID-19 testing, the best news for the company lies beyond the outbreak. That’s why Abbott is the best coronavirus stock and health care stock to buy now.
This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.