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Co-Diagnostics: Why Traders Shouldn't Take COVID-19 Stocks Too Seriously

Jun. 01, 2020 8:39 PM ETCo-Diagnostics, Inc. (CODX)9 Comments
Gary Bourgeault profile picture
Gary Bourgeault


  • A look at whether or not Co-Diagnostics' big surge is sustainable or justified.
  • Why its latest earnings report really has little bearing on the future performance of the company.
  • How to play a stock like Co-Diagnostics.

co-diagnostics should only be held for the short term at this time, whether going short of long.source: company website

It's no secret that biotech stocks associated with COVID-19 have been soaring in response to a seemingly endless number of press releases, with investors and many traders being triggered into taking positions in a lot of these companies because of fear of missing out (FOMO).

One of the biotech companies generating a lot of interest from investors is Co-Diagnostics (NASDAQ:CODX), which has soared since the latter part of January 2020, when it was trading for about $2.00 per share, rising to $18.00 per share at close of May 29, 2020. It had jumped to over $23.00 per share in the middle of May, 2020.

In this article I want to explore whether or not Co-Diagnostics is a serious contender in the COVID-19 segment, and if investors and traders should take it seriously for a long-term holding. The other option is to take trading positions in response to wide swings in its share price for a short period of time - both short or long.

Latest earnings

Few of these newly discovered biotech companies have earnings that are relevant to their outlook because they were generating little in the way of revenue until the coronavirus crisis emerged, and even now, not many of them are getting a significant boost from sales because they have yet to materialize in a meaningful way.

With that in mind, the latest earnings report of Co-Diagnostics should be used as more of a confirmation of its weak and unpredictable performance, rather than having any visible significance to the long-term future of the company.

With the company and pumpers pointing out the demand for its testing kits throughout the last quarter, it generated a lot of excitement and expectations concerning its earnings numbers for the reporting period. To say it was underwhelming would be an understatement.

This article was written by

Gary Bourgeault profile picture
I am a former investment advisor and owner of several businesses. These days I invest only for myself while continuing to write on a variety of financial and economic topics.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (9)

Is now a good time to invest in CODX?
You seem to be missing the fact that they have A $50 million Dollar order pipeline
02 Jun. 2020
The info in this article is poorly documented and laughable. "Anemic" 1.6 million revenue and bad EPS he says, without considering the earnings growth it's been experiencing the last few quarters before corona-virus, the company clearing out it's debt, the institutions buying the company up - but no! All that matters to short sellers is if there's a P/E ratio or not. Then he says he sees "no chance" for sales to continue without backing up why that's so.

The final nail in the coffin is when this article says "assuming they sell [all twenty million kits], there's no way to know how much revenue that would bring." Yes there is, it's the price of one kit multiplied by twenty million. Basic arithmetic, but that doesn't occur to the author. This is not hyperbole, this is his exact words, paragraph 7 from the heading "Latest Earnings." The most abysmal thing tied to this company has to be the information presented here. The reason this article is so brief is because it was one breath away from perpetrating a short-and-distort scheme if it tried to insinuate how bad this company was.
I am not sure why you are using $50 as the basis for the price for a test, or as you say "If it prices and sells the kits at half of $50 or a little less...". Those statements are completely futile with respect to CODX. If you would know CODX, you would know that their pricing is $7 per test. In their vision statement on their website they say "...positioning Co-Diagnostics to be the worldwide low-cost leader of molecular diagnostics services". Besides their patented technology, their superior accuracy, the relatively high speed for performing up to 48 simultaneous tests per kit, and their manufacturing capabilitites through partners, this is what sets them apart from other companies.
Duras profile picture
I'm in agreement with the three previous commentators, @Phishphan, @Reality_is_real, @VCme, and I invested in CODX for about the same reasons @Phishphan laid out so very well. I can only add that these small biotechs with their small floats are a target for short sellers who want to manipulate the market. That can lead to some serious distortions and untruths getting put out in comment sections here and elsewhere and in some articles -- please note I'm not suggesting this article is in that category. I'm here for the money (and the fun), so is my banker, we'll see.
I see your side of the coin, good write up, but here’s the side of the coin I’m looking at. You wrote that the q1 earnings report was underwhelming, but if I remember correctly the emergency fda approval came w/ only 3 days left in the first quarter, so of course sales #s q1 didn’t reveal much. They met q2 sales quota already, I believe 14 days into q2. The sales #s in q2 will be through the roof. I am very bullish on this stock, 1625 shares and I’m looking to add more shares still. The stock has found a floor at $17.5 to $18 range and has touched the $31 mark recently. Uncle Sam played hot potato initially w/ testing while Covid was first spreading but they’ve finally told the states to fend for themselves which they have. Codx sells to many states, India (where they also have a test Mfg facility) Russia among many many other countries around the globe. There tests are very accurate and affordable. Abbott’s labs tests give off high % of false positives and false negatives, Codx tests do not. Codx is now a possible target for acquisition by larger companies as well. Additionally Codx is about to get emergency fda approval for a spit test kit which will be in huge demand here in the USA and abroad in places such as India which has a population of 1.5 billion people and where a spit test would be ideal. I see a price of $45 a share mid q2 or early q2, this stock is going to gap up sooner than later. Also demand in the USA might increase even further in the next 30 days due to the protests & riots where people have clearly been in very close quarters with each other for long periods of time. The cherry on top of all of this is Major League Baseball stated in a recent Espn article that they were working on a testing solution w/ the lab they already use for steroid testing for all mlb players and that lab is in Utah and located literally 3.2 Miles away from Codx headquarters. If Mlb plays in 2020 and 2021 I wonder who would provide test kits to the lab and the MLB seeing they are literally an 8 minute drive away from Codx headquarters. I understand your cautious wait and see approach but to me I love this stocks potential and obvious upside in the short and midterm. In my opinion, skate to where the puck is going, not to where the puck is at the moment.
You need to do a bit more research to know that the company has existed since 2013 based on superior proprietary PCR technology. It get more notice due to covid, but its value it not from selling test kits.
01 Jun. 2020
You are leaving out a lot of key elements that have earned a current value for codx at $30, $35 and $36 price target.
Over 50 countries and 22 states are currently purchasing from codx. They have shown emasculate accuracy and sensitivity with their molecular test. Italy even found their test to identify covid before symptoms appear from a removed tumor. During Q1, codx had yet to get approval with cosara (in India). Now that’s running full steam ahead. That had just signed on with promega in Madison WI as a manufacturer. And it was 20 million being manufactured AND SOLD three weeks ago. They are already in the green on the year; all year expenses covered. Capable of making 4-6 million tests a week. And waiting for approval on their saliva test.
Folks want to feel safe at work, at college, kids in school. These tests are what is requires for that piece of mind and safety.
Btw: weak research here. No one is calling for $50 a kit. Large orders are being filled at $10 kit. No one is competing with that. 
Oh and many folks are drooling over the technology/patents they have in place.
Put all this together and that’s why Q2 report in July will verify this stock is worth $35 and will be due for another increase. Wait until after q2 and miss out.
This is not a vaccine lottery ticket stock or an antiviral drug that hopefully helps folks. Those two categories typically have a lot of cash burn, little to no revenue and living in hope. That’s a FOMO stock.
This is a PROVEN winner that has an amazing product in the pipeline, another one coming and is already very profitable. Like you said, 71% profit in revenue. That’s huge! And it is because they own all their technology.
I could go on and on; this piece is garbage and leaves out a lot of truths about codx. I boo this man
zerobid profile picture
Your the one that might get booed here as Covad hype subsides, and this crashes under 5. You have not done your homework on the promotional nature of this company, the history of pumps, and some of the suspect characters involved, like the CFO, affiliated with other stock pumps in the past.
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