One I’m looking forward to that is not on your list is Fulgent Genetics (FLGT) on Mon, 8/9 (after market close).
This is my #6 holding, and currently 7.3% of my portfolio. I started building my position in the $44 range in Dec of 2020. Its been a very volatile stock, up to almost $190 in Feb (probable meme stock boost), back down to low $60s, currently $105-$110, up about 75% from it’s lows in mid May. I’ve added to my holding a few times on good earnings releases, and on drops, but it’s done the heavy lifting in increasing my percent allocation to what it is today.
Prior to Covid, it was strictly an NGS (next generation sequencing) testing company, but they pivoted quickly and very profitably into Covid testing as the pandemic hit. Management showed how good they are in being able to ramp from 13,000 tests in 1Q20, to 3.8M tests in 1Q21, a volume increase of 290X. While having a GM near 80%, OM over 70%, and PM in the mid 50%. That has all increased their cash on hand to $700M at the end of 1Q21, and they’ve said they’ll have over $1B cash by the end of this year (barring any acquisitions). Recent market cap of just over $3B with expected revs of $830M. They’re priced as if ALL Covid rev will be going away.
On the last earnings release they reported $359M in rev, and increased their 2021 expected rev from $800M to $830M. The increased $30M was for their NGS business that went from $70M for the year to $100M for the year. The other $730M is expected to come from Covid testing. Obviously this was a big unknown as to how much that would be, but I believe they guided very conservatively on these numbers. So for the year they’re saying $830M which leaves us with the following:
Q1 Q2(guide) Q3(est) Q4(est) 359 200 135 135
Here is a graph of the number of Covid tests performed in the US:
From the chart, I estimate that in Q1 of this year we started out around 1.7M tests/day and ended the quarter around 1.2M tests/day… simple average of 1.45M tests/day. Whereas Q2 went from 1.2M to maybe 600K tests/day… simple average of 900K tests/day. That’s a reduction of 38%, if we assume FLGT kept their share the same through this time, their est rev for Q2 would be 62% of $359M or $223M for Q2 just from estimating the number of tests performed. I know there are a lot of variables not accounted for in there, but this gives me a sense that they’re going to beat their guide, we’ll have to wait and see on Mon.
But what I think will be more important than a beat on last quarter, is that from above, the Q3/Q4 estimates were for $135M each (remainder split equally), but from the chart of tests/day, early July hit a low of 500k tests/day, but that is already up to 750k tests/day with the large increase in Delta variant cases showing up in the US. And that doesn’t seem to be slowing down anytime soon from my view. I feel the company will have a better handle on what Q3/Q4 rev will be after seeing the increase in July and the beginning of Aug, and with also knowing winter is on it’s way, potentially making things worse as viruses spread easier with people inside toward the end of the year, I think they’ll raise their full year estimates quite a bit.
The other potential fuel they have is almost a 30% short ratio, and if they announce a beat and raise quarter like I think they will, we could get a lot of shorts trying to cover quickly. This stock could also get some Wall Street Bets help as they seemed to get a boost from that craze when they spiked to $190 in mid Feb.
Really what you’re investing on is whether FLGT will be able to keep some of their Covid rev for longer than expected. For the past 5 months, the stock has been priced like it would lose ALL Covid rev by the summer, once the vaccines were prevalent, that’s obviously NOT going to happen, and I tend to think they’ll be pulling in at least a couple hundred million Covid dollars of rev each quarter for a while yet. And FYI, I’m not happy in the least that Covid seems to be extending it’s stay, I would much prefer it disappeared completely, and I would take my profit and invest it elsewhere, but from what it looks like to me, I think FLGT is going to have a good run ahead of it so I’m staying in for now, and hope we get rid of this thing in the future once and for all.
My biggest concern, is I seem to be on an island with this one, in seeing people’s posted portfolios, I don’t see any other FLGT holders, although I think there are a couple around. Please nobody new here invest a bunch of money because of my optimistic view above, without taking full responsibility yourself for what you’re doing. I’m wrong more often than most on this board, so do your own due diligence before investing… and keep your fingers crossed for me tomorrow.