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Here's Why You Should Retain QuidelOrtho (QDEL) Stock for Now

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QuidelOrtho Corporation (QDEL - Free Report) is well-poised for growth in the coming quarters, courtesy of its strong product portfolio. The optimism led by a solid third-quarter 2023 performance and its continued spending on research and development (R&D) are expected to contribute further. However, headwinds due to data security threats and overdependence on diagnostic tests persist.

Over the past year, this Zacks Rank #3 (Hold) stock has lost 13.7% compared with a 0.9% decline of the industry. The S&P 500 has witnessed 24.6% growth in the said time frame.

The renowned rapid diagnostic testing solutions provider has a market capitalization of $4.71 billion. QuidelOrtho’s earnings yield of 7.1% compares favorably with the industry’s negative yield. The company’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 39.6%.

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Let’s delve deeper.

Product Portfolio: We are upbeat about QuidelOrtho’s current product clientele. It sells its products directly to end users and distributors for professional use in physician offices and hospitals, among others, as well as for individual, non-professional, over-the-counter use. QuidelOrtho’s diagnostic testing solutions include the Sofia and Sofia 2 Analyzers, QuickVue, and InflammaDry and AdenoPlus products.

In September, QuidelOrtho was granted a CLIA Waiver by the FDA, which applies to its new Sofia 2 SARS Antigen+ FIA (fluorescent immunoassay).

Continued Spend on R&D: QuidelOrtho’s long-term growth and profitability will depend, in part, on its ability to retain and grow its current customers and attract new customers by developing and delivering new and improved products and services that meet customers’ needs and expectations. As a result, QuidelOrtho’s management expects to continue to maintain its emphasis on R&D investments for longer-term growth, including its next-generation platforms and assays, as well as additional assays to be launched on its current platforms.

Strong Q3 Results: QuidelOrtho’s robust third-quarter 2023 results buoy optimism. It recorded an uptick in its Non-Respiratory revenues. Robust revenues from its Labs and Transfusion Medicine segments and China and Other regions were also registered. Strong revenue growth in the Europe, the Middle East and Africa region on a reported basis and from its Instrument and Recurring revenue categories were also recorded.

Downsides

Data Security Threats: QuidelOrtho utilizes complex information technology systems to transmit and store information, including proprietary information, to support its business and process. In the future, these systems may prove inadequate to its business needs and necessary upgrades may not operate as designed, resulting in high costs or disruptions in portions of the company’s business.

Overdependence on Diagnostic Tests: A significant percentage of QuidelOrtho’s revenues comes from the sale of COVID-19 and influenza tests and these are expected to remain a significant portion of the company’s total revenues for at least in the near future. As a result, if sales or revenues of COVID-19 or influenza tests fall for any reason, the company’s operating results will be affected.

Estimate Trend

QuidelOrtho is witnessing a negative estimate revision trend for 2023. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved a penny south to $4.99.

The Zacks Consensus Estimate for the company’s fourth-quarter 2023 revenues is pegged at $798.2 million, suggesting a 7.9% decline from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks in the broader medical space are DaVita Inc. (DVA - Free Report) , HealthEquity, Inc. (HQY - Free Report) and Integer Holdings Corporation (ITGR - Free Report) .

DaVita, sporting a Zacks Rank #1 (Strong Buy), has an estimated long-term growth rate of 17.3%. DVA’s earnings surpassed estimates in all the trailing four quarters, with an average surprise of 36.6%. You can see the complete list of today’s Zacks #1 Rank stocks here.

DaVita’s shares have gained 50.9% compared with the industry’s 9.7% rise in the past year.

HealthEquity, carrying a Zacks Rank of 2 (Buy) at present, has an estimated long-term growth rate of 27.5%. HQY’s earnings surpassed estimates in all the trailing four quarters, with an average of 16.5%.

HealthEquity has gained 2.9% against the industry’s 7.5% decline over the past year.

Integer Holdings, flaunting a Zacks Rank of 1 at present, has an estimated long-term growth rate of 15.8%. ITGR’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 11.9%.

Integer Holdings’ shares have rallied 43.9% compared with the industry’s 4.1% rise in the past year.

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