While it is definitely too soon to just assume that the COVID-19 pandemic is over and done with, the rapid expansion of vaccinations does appear to be reducing transmissions, and with that, there has been a noticeable decline in testing in the United States. It remains to be seen, though, how many people will ultimately choose to be vaccinated, how new variants may impact the vaccinated, and how long the vaccines will be effective. With that, the path of COVID-19 testing in the U.S. is highly uncertain.
As a major player in COVID-19 testing, that creates definite challenges for modeling Hologic (HOLX) financials today. It’s inarguable that the pandemic has led to a significant expansion in the company’s diagnostics business footprint, but how quickly COVID-19 testing will scale down is a major unknown and has a significant impact on the financials.
I believe the core of Hologic is in good shape and that the company will be able to leverage some of the gains made during the pandemic to take the diagnostics business to a new level. I expect mid-single-digit core growth at Hologic from the post-COVID-19 trough, as well as further M&A, and I believe the shares still offer worthwhile upside to long-term investors. Less patient investors should be aware, though, that the shares could be quite volatile as the testing situation shakes out over the next two to three years.
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