Is Cue Health (HLTH) a Good Investment?

Cue Health (HLTH) stock rose 25 percent on its first day of trading on Sep. 24 to close at $20. Robinhood investors had a chance to buy the IPO stock before it hit the public market. Is Cue Health a good investment? What’s Cue Health's stock forecast for 2025?

Cue Health, a medical diagnostics company, is best known for its at-home COVID-19 test. In addition to the U.S., Cue Health’s COVID-19 test has been authorized for use in Canada, Europe, and India. The U.S. government is Cue Health’s largest customer. The company also supplies COVID-19 test kits to Google and Mayo Clinic, which uses them in its hospitals and clinics.

In the first half of 2021, the company's revenue rose YoY (year-over-year) to $202 million from $5 million, and its profit rose YoY to $33 million from a loss of $19 million. Cue Heath stands to benefit from the Biden administration’s COVID-19 pandemic response efforts, which include investing $1.6 billion to support testing and prevent the spread of the disease.

Cue Health is one of several diagnostic companies that sell COVID-19 tests to have gone public in the pandemic. Biodesix (BDSX), which went public in Oct. 2020, is currently trading 70 percent below its peak, and Lucira Health (LHDX), which went public in Feb. 2021, is trading 80 percent below its peak.

Cue Heath isn’t your average COVID-19 test company. It works with the U.S. government and has partnered with Google, and is developing other tests in addition to its COVID-19 test. Its pipeline includes pregnancy, fertility, influenza, and RSV (respiratory syncytial virus) tests. The company estimates its target market is on track to reach $51 billion by 2025 from $30 billion in 2020.

The company priced its IPO at $16 a share, at the midpoint of its targeted range of $15–$17. The stock opened above $16 and peaked at $22.55. If Cue Health can keep reporting impressive earnings and expanding its product portfolio, more investors will want to get exposure to the stock. Therefore, it wouldn’t come as a surprise if HLTH stock doubles or triples its IPO price by the end of 2021.

The company raised $200 million in its IPO, adding to the $246.3 million in cash it already had. The well-capitalized company should have the financial flexibility to pursue growth opportunities.

It plans to use as much as $65 million of its IPO money on research and development as it works to bring more products to market, and more than $100 million on expanding its manufacturing activities. Cue Health currently produces 43,000 kits per day but aims to raise that figure to 100,000.