The novel coronavirus outbreak has been affecting stock prices worldwide for the past couple of months. Benchmark indices in major markets have been registering a free fall since the beginning of March. The U.S. stock market crash resulted from panic selling as the number of coronavirus cases soared above 200,000.
Is the Worst Over?
After the U.S. stock market witnessed a free fall, the U.S. Congress approved a stimulus bill on Mar 24, which was subsequently passed on Mar 27. As soon as the news of the stimulus package reached the market, the Dow Jones Industrial Average closed more than 2,100 points higher or 11.37%, whereas the S&P 500 rose 9.38% and the Nasdaq grew 8.12%. Notably, this was the Dow's biggest one-day percentage jump since 1933.
The $2.2-trillion economic relief package agreed upon by Trump and the Senate on Mar 24 also led to the S&P 500’s biggest daily gain since 2008. The rescue package is aimed at saving industries hit by the outbreak and to put a check on unemployment. Further, the Federal Reserve pledged to buy unlimited U.S. government bonds and provide a backstop to the US corporate bond market, as reported by Financial Times.
How MedTech Space Will Perform With the Rescue Stimulus
Among the stocks going downhill post the market crash, MedTech stocks have received the worst blow. Certain companies, with extensive operations in China, registered a sharp fall. Although the relief package is yet to be delivered, we currently turn our focus to four MedTech stocks, which have the probability of rebounding once the economic relief package (focusing on paying salaries and wages of the stagnant businesses, and easing out loan complexities for small business holders) gets implemented and the coronavirus-led market mayhem ends.
QIAGEN N.V. QGEN is a renowned molecular diagnostics solutions provider. The Zacks Rank #2 (Buy) company has been witnessing a volatile trading session since the beginning of March, with a steep fall on Mar 20. It has been witnessing issues with the China market, like slowdown in orders from distributors, since mid-2019, which it has taken into consideration while announcing its guidance for 2020. However, post the outbreak, the company has been seeing an uptick in global demand for its coronavirus testing solutions.
It has already started shipping its QIAstat-Dx Respiratory SARS-CoV-2 Panel test (which is to be sold as an in-vitro diagnostic or IVD) in the United States to help diagnose coronavirus-infected patients. The announcement came after a new policy of an Emergency Use Authorization (EUA) was declared by the FDA early this month. The company is currently ramping up production of test kits for the detection of SARS-CoV-2. Over the past six months, it has rallied 26.6%, outperforming the industry’s 7.9% rise.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Teleflex Incorporated TFX, a key medical technology products provider. Even though the Zacks Ranked #3 (Hold) company’s fourth-quarter results did not reflect any impact of the outbreak, it anticipates considerable impact on first-quarter 2020 results. Teleflex apprehends a headwind of $5-$10 million, assuming that life in China returns to normal at the beginning of April.
The market for medical technology products is expected to rebound once the stock market is stabilized. Also, Teleflex’s diversified reporting segments are expected to boost overall growth once normalcy resumes.
Over the past year, Teleflex has recorded a decline of 6.5%, compared with its industry’s 15.2% fall.
ResMed Inc. RMD is a major player in the generators, masks and related accessories for the treatment of sleep-disordered breathing (SDB) and other respiratory disorders. The company currently carries a Zacks Rank #2. It has been keeping a close watch on its China business since the outbreak. Even though majority of the company’s supply chain is not configured in China, there are some second and third-tier suppliers.
We believe that even though ResMed might get affected by the stock market slump, its critical care device production will ramp up post the normalization of situation in China. Meanwhile, the company is increasing its ventilator production in China at a time when it is expecting a slack in its SDB patient numbers. Over the past six months, ResMed has recorded a rise of 6.3%, against its industry’s 17.8% fall.
Abbott Laboratories ABT has a diversified line of healthcare products. The company, which currently carries a Zacks Rank #3, has a strong diabetes business. Amid the plummeting stock market, it registered steep declines in its stock price. This led to the overall company performing below expectations.
However, the strength in its diabetes business is expected to help the stock rebound once the market sentiment becomes optimistic post the delivery of the promised financial relief package. In this regard, Abbott has already achieved global leadership among continuous glucose monitoring systems for both Type 1 and Type 2 users.
The company has also been contributing to combat the coronavirus pandemic with the help of its RealTime SARS-CoV-2 EUA tests, which will be used on its m2000 RealTime System. The FDA issued a EUA for the test, which Abbott has shipped to existing customers in the United States. Further, the company received the FDA’s EUA for the fastest available molecular point-of-care test for the detection of novel coronavirus, which delivers positive results in five minutes and negative results in 13 minutes. Notably, the test will run on the company's ID NOW platform and will provide faster results in a variety of healthcare settings.
Over the past month, Abbott has seen a decline of 8.9%, compared with its industry’s 17.8% fall.
The Hottest Tech Mega-Trend of All
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