Quidel CorpQDEL99,00 $
Today we have a moderately speculative idea.: take shares of the manufacturer of laboratory tests Quidel (NASDAQ: QDEL), to make money on their rebound after a strong drop.
Growth potential and validity: 24% behind 2 of the year; 66% behind 5 years; 139% behind 10 years.
Why stocks can go up: because investors deny the obvious - the company's business still has something to offer.
How do we act: take now 103,80 $.
When creating the material, sources were used, inaccessible to users from the Russian Federation. We hope, Do you know, what to do.
No guarantees
Our reflections are based on the analysis of the company's business and the personal experience of our investors, but remember: not a fact, that the investment idea will work like this, as we expect. Everything, what we write, are forecasts and hypotheses, not a call to action. To rely on our reflections or not – it's up to you.
And what is there with the author's forecasts
Research, like this and this, talk about, that the accuracy of target price predictions is low. And that's ok: there are always too many surprises on the stock exchange and accurate forecasts are rarely realized. If the situation were reversed, then funds based on computer algorithms would show results better than people, but alas, they work worse.
So we're not trying to build complex models.. The profitability forecast in the article is the author's expectations. We specify this forecast for the landmark. As with the investment idea in general, readers decide for themselves, it is worth trusting the author and focusing on the forecast or not.
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What the company makes money on
Quidel makes things for tests and analyzes - test kits and consumables. According to the company's annual report, its revenue is divided into the following segments:
- Quick Tests - 70,49%. In this segment are accounted for as consumables, as well as software.
- Tests for heart disease - 15,05%. It is a portable platform for monitoring patients with cardiovascular disease. In the same segment, the company conducts testing for the presence of traces of drugs in the analyzes.
- Solutions for Molecular Diagnostics - 11,8%. The name of the segment exhaustively describes its essence.
- Dedicated Diagnostic Solutions - 2,66%. Here the company makes things to test for viruses and bone disease..
Revenue by country:
- USA - 83%.
- China - 3%.
- Other, unnamed countries - 14%.
Arguments in favor of the company
Fell down. In December 2021, the company's shares cost 174,59 $, and now they are standing 103,80 $. There are a couple of reasons for this fall..
Firstly, pandemic, on which the company made good money, doing coronavirus tests, went into decline, and investors decided, that the era of super profits for the company is over. Really, now it seems, that the pandemic has receded, - but it's temporary. Coming years 10 we are waiting for a string of new viruses and their strains - and Quidel will be able to capitalize on this.
Secondly, Quidel announced its intention to buy a company of about the same size - Ortho Clinical Diagnostics - for $4.3 billion. They buy it at a premium 25% to its price before the news.
More than half of the purchase amount will be specially issued Quidel shares - the share of current shareholders will be greatly diluted from this, and that's why the stock went down. without denying that, that the integration of Ortho Clinical Diagnostics will take some time, I'm still optimistic: the company will grow almost twice and will take the seventh place in the global diagnostics market.
Certainly, the deal can still be canceled, but, it seems to me, the chances of it, that it will become a reality, quite high. So I think, Investor skepticism is exaggerated and stocks are waiting for a rebound.
"Don't be afraid of the rain, no slush…” In December 2020 it seemed to me, that the company's excessive focus on the coronavirus will slow down its R&D in other areas, what will prevent it from rolling out new products to the market, which will be relevant not only during a pandemic. But my fears were unfounded: over the past year and a half, she has new tests and solutions, non-pandemic and demanded by the market. This is a very important point., which testifies to, that Quidel can thrive in more than just a pandemic.
Can buy. Even after the merger of Quidel, there will be fewer such companies., like Abbott Laboratories, Thermo Fisher, Roche и Danaher. And that's more of a plus.: very likely, that one of them decides to buy Quidel due to these circumstances.
What can get in the way
Concentration. A small group of customers occupies a disproportionately large place in the company's revenue structure: 24, 9, 9 And 7%. Changing relationships with one of them can be very bad for Quidel's reporting..
Accounting. Joining Ortho Clinical Diagnostics will cost the company very much: it will have to take on the long-term debt of Ortho Clinical Diagnostics - almost $ 2.187 billion. Also to buy this company Quidel will have to borrow some amount.
As a result, Quidel will find itself with a large debt burden during a period of rising rates and rising loan prices - which will be bad for the company's accounting department., same for quotes. Investors may be put off by her debt.
Coronavirus. Periodic 'thaw' and 'shift change' periods will reduce demand for Quidel virus tests, which will not have a very good effect on its reporting and quotes. It needs to be understood and accepted..
What's the bottom line?
Shares can be taken now at a price 103,80 $. And then there are three options for the development of events:
- wait for the quotes to rise to the level 130 $. Think, we will reach this level in the next 2 of the year;
- hold until they return to the level 174 $. Better get ready to wait here 5 years;
- hold stocks until they return to the level 250 $ - so much they asked for in January 2021. Here it is worth laying the waiting time in the area 10 years, so that during this time the company can realize all the advantages of the merger with Ortho Clinical Diagnostics.
