AIM-listed Novacyt (LSE:NCYT), a clinical diagnostics specialist, has had an exciting couple of months. The Novacyt share price is up an incredible 2,650% year-to-date!
Its shares surged in April when the World Health Organisation (WHO) fast-tracked Novacyt’s rapid Covid-19 test and recorded the test as eligible for emergency use. Large-scale testing is thought to be key to enabling countries to emerge from lockdown and return to work. This is because it can help track the spread of coronavirus throughout the general population.
The London-listed biotechnology company has already signed a government contract to provide 288,000 tests per week to the NHS. This is a six-month contract with the option for an extension. In addition, it is supplying 20 hospitals with its test through orders from Public Health England. Primerdesign, a Novacyt subsidiary, is developing the test in Southampton.
Novacyt news and financial update
Novacyt reported its annual results last week, with a net loss of €6.6m for 2019 caused by lower revenue and higher expenses. Revenue for 2019 was €13.1m, compared to €13.7m for 2018, so a disappointing decline in both.
Novacyt is a highly speculative stock with no dividends, negative earnings per share, and a £248m market cap. Nonetheless, it does expect better results this year, as demand for its coronavirus tests increases. The Novacyt share price fell 11% on the release of its annual results, but it is climbing again today and was up over 26% at one point. This proves what a volatile stock this is and not for the faint of heart.
The future for Novacyt stock
With these contracts in place and recognition from the WHO, it seems Novacyt has cemented itself as a mainstream player. Global demand for Covid-19 testing is continuing and Novacyt also has other products underway, including mobile Covid-19 testing. Its present commitment to growth and expansion is unlike anything it has previously undertaken. I think it will have more than enough to keep it busy this year at least. I do not see its share price having another surge of the same magnitude, but price fluctuations are likely to continue.
If Novacyt can live up to its expectations, then I think it will continue to do well. However, it is still a micro-cap stock on AIM, which means it comes with risk. Pharmaceuticals are a competitive sector to operate in. When trials fail or a product does not meet predictions, the share price suffers. If you are looking to increase your chances of making a million, then I think that ship has sailed for Novacyt.
I hope Novacyt will continue to thrive and survive long after the coronavirus crisis has passed, but I don’t think it is one of the best shares to buy right now. Newcomers to stock market investing should steer clear of speculative investments and look to the long term with more certain investment choices.
