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FLGT still has short covering potential as it finds a bottom

At the beginning of 2021, we highlighted two top contrasts for the new year. Senior Market Strategist Matthew Timpane provided a selection that posted a decent 43.6% increase over six months of the year. To access the full 2021 report, Click here. Below, we’ll do a small autopsy on FLGT as we look ahead to see what the stock has left for the final six months of 2021.

Medical device manufacturer Fulgent Genetics Inc (NASDAQ: FLGT) Has seen a significant boost in sales from next-generation sequencing (NGS) monitoring, which is used to track coronavirus mutations, which are essential to vaccine management. The Covid-19 tests will certainly continue as new variants of the SARS – CoV – 2 strain continue to emerge. It’s a sobering thought, but herd immunity is still a long way off, so testing will continue, albeit at a slower rate. And despite the recent international expansion, many countries still do not have Covid-19 under control.

Fulgent Genetics has the chance to continue to be a heavyweight in the field thanks to its status as a low-cost vendor, and it is hoped that the success of the Covid-19 testing will roll over to other genetic and disease-specific testing segments of the business . An act to watch; With a market capitalization of only $ 2.44 billion, Fulgent Genetics could be an acquisition target for larger companies. With that in mind, let’s review FLGT’s outlook for the rest of 2021.

Fulgent’s basic setting paints an optimistic picture. More than a billion dollars in cash reserves are expected by the end of the year – a real war chest thanks to Covid-19 tests. So it becomes another storyline to watch for the second half of 2021; How will the company use it? It is also reasonable to expect Fulgent’s sales growth to slow from the extreme levels of last year. Still, the projections for 2022 are still close to 97%, so there’s reason to believe this isn’t just a flash in the pan.

Fulgent Genetics stock hit the bottom of the charts after pulling back to its 200-day and 40-week averages. Stocks recently broke out of a large symmetrical triangle pattern, suggesting a continuation on the upside. A pullback should have been expected with a 252% increase through February, as profit takers intervened on such a fast run. But now that the stock is up 44% since the start of the year, this offers a unique buying opportunity to go long or add to your position and trade against the trendlines above, with this uptrend being a handy stop level. And with a P / E ratio of 6.68 for the future year, FLGT is becoming an intriguing target as a value trade.

Short interest has rocketed from its peak in mid-April, and with 30% of the total available float on FLGT sold short, a contrarian would consider this setup a potentially neat short squeeze.

Despite the recent volatility, FLGT options are also reasonably priced right now, as measured by the Schaeffer’s Volatility Index (SVI) of the stock of 68%, which is above just 6% of all other values ​​in its year-span. This implies that option players are pricing in relatively low volatility expectations.

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