Bull of the Day: Quidel (QDEL)

Quidel (QDEL

) is the $11 billion provider of rapid COVID-19 antigen tests that has analysts raising revenue estimates hand-over-fist this year to $1.45 billion, representing over 170% annual growth.

And profit projections have vaulted to nearly 400% annual growth -- while 2020 EPS of $14.75 now makes the stock's P/E trade under 17X -- after Quidel received Emergency Use Authorization (EUA) from the FDA to market its new combination "ABC" kit that tests for influenza A and B as well as COVID-19.

Here's what I wrote to my TAZR Traders members on October 1st, after we were buyers of QDEL shares last month near $160...

QDEL Warns... of Massive Revenues
10/1/20

Let's check in with Quidel which jumped 11% to $244 this morning after management announced stunning preliminary Q3 results.

Here's a summary of the company press release...

Quidel sees Q3 revenue $475M-$477M, consensus $395M -- AND Q4 OF $800M!

"The entire team at Quidel has truly risen to the challenge of the COVID-19 pandemic, producing and shipping millions of tests to those with the greatest need, and further democratizing testing by providing affordable rapid testing to tens of thousands of communities throughout the United States. We are proud of the leading role we are playing to slow the spread of disease and, ultimately, get Americans back to work," said Douglas Bryant, president and chief executive officer of Quidel Corporation.

"Moving forward, we expect even greater success in augmenting our supply chains and production for our COVID-19 diagnostic products, resulting in $800 million or more in revenue in our final quarter of 2020."

These preliminary results are based on management’s initial analysis of operations for the quarter ended September 30, 2020. The company expects to issue full financial results for the third quarter in late October.

(end of QDEL PR notes)

Now, when I look at Q4 estimates for only $452 million on the top line Zacks Consensus -- including a high estimate of just $490M -- I can't believe the stock didn't rock above $250 on this guidance of "$800 million or more" from Bryant!

Maybe the crowd is wrong. Maybe somebody knows something we don't.

Either way, I'm staying long right now.

Oh, in addition to Quidel's official report in late Oct, Quidel's management team will hold a virtual Investor Day presentation on November 12, 2020 beginning at 8:00 am Pacific with a question-and-answer session scheduled immediately following the management presentation.

Btw, here's a little thing I did on QDEL and peers in the hottest of Biotech/MedTech spaces right now...

7 Diagnostic and Genomic Stocks Storming Into October

The video is only 10 minutes, but the article is just a 3-minute read and packed with more info!

(end of Oct 1st notes to TAZR members)

Here's a snapshot of the rapid rise in revenues and profit projections for this key maker of rapid, point-of-care diagnostics...



A couple of things stand out. First, analysts are not currently taking Quidel management at their word on the $800 million guidance for Q4 revenue, only showing a consensus of $637M (red rectangle). But that could mean that some either haven't updated their models or they remain cautious until we see what the company delivers next week in their official Q3 report on 10/29.

Second, in mid August after the company's big beat-and-raise Q2 report, here's what I observed in my Bull of the Day...

"Next year's revenue consensus calls for nearly 26% growth to $1.44 billion. I expect those 2021 estimates to keep climbing on both the top and bottom lines."

Well, that's exactly what transpired in the next six weeks as you can now see the 2021 top line estimate is $2.15 billion for 48.5% growth.

But some analysts are noticing that their peers and investors aren't quite getting the message yet.

Here was reaction from William Blair analyst Brian Weinstein on October 5 after the FDA approval for Quidel's newest "ABC" combo test, courtesy of TheFly.com...

Quidel emergency use news may be getting overlooked, says William Blair: Given the news cycle over the weekend with President Trump in the hospital, some "may have either missed the news, saw it but did not pay attention, or may not appreciate what this could mean for the company," William Blair analyst Brian Weinstein told investors in a research note after Quidel announced Friday night it had notice of FDA Emergency Use Authorization for its combo influenza plus SARS-CoV-2 antigen test.

Having a rapid antigen product that can simultaneously distinguish between influenza A, B, and COVID-19 is "value-creating for patients, clinicians, and the company as we are now in the 2020-2021 influenza season," said the analyst. Weinstein expects testing demand for such a test to be "robust, even if confirmed influenza cases are down."

Many people who would not ordinarily get tests and those who may just have seasonal respiratory viruses other than influenza will look for confirmation they have neither influenza nor COVID-19, said Weinstein. He expects Quidel's price for the product to be about a 50% higher than the stand-alone COVID-19 assay. The analyst keeps an Outperform rating on Quidel.

Other analysts who do "get it" include Piper Sandler's Steven Mah, who reacted to both the new test and the company's "warning" of massive revenues on October 2. Mah was pleased with Quidel's positive pre-announcement and recent wins with the Pac-12 and Big-10. COVID-19 testing will "remain durable for the coming years (even with a vaccine) and the market is large enough for multiple players," Mah told investors in a research note. He believes Quidel can capture $1.08B and $1.58B of COVID-19 revenue in 2020 and 2021, respectively, up from prior COVID-19 estimates of $650M and $1.15B. Mah reiterated his Overweight rating and $360 price target.

An Overnight Success... Since 1979

In previous Bull of the Day articles for Quidel, I highlighted several of the recent FDA approvals and EUA's -- including over $600 million in Biomedical Advanced Research and Development Authority (BARDA) funding -- which have put the company on the map as a player among giants like Abbott, Danaher, Roche and Thermo Fisher Scientific in coronavirus testing and medical diagnostics in general.

I suggested at the time that QDEL could easily be an M&A target for such firms under a $10 billion market cap. But, now I suspect management has their own designs about who and what they want to become. After all, they've been at this a while too as this paragraph from the company website explains...

Quidel began operations in 1979 and launched its first products in 1983, as well as the world’s first rapid diagnostic test for Influenza A/B in 1999. Since that time, Quidel has experienced double-digit growth and expanded its market reach through internal product development as well as through acquisition, with a focus on investment in research and development to accelerate the rate of new product introductions.

Bottom line and disclosure: I would be a long-term buyer of QDEL near $250. I own shares of QDEL for both the TAZR Trader and Healthcare Innovators portfolios.

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