Chembio Diagnostics Stock Has Promising Future, Buy at a Discount

Chembio Diagnostics (CEMI) makes products for detecting diseases, particularly infectious diseases. The company has been around since the 1980s and went public in 2004. Chembio's COVID-19 testing expanded its business. What is CEMI's stock forecast and should you buy now as its rapid COVID-19 test goes on sale?

Chembio Diagnostics stock surged more than 60 percent to $5.64 on April 5. The stock shot up on the COVID-19 test commercial launch announcement. However, the stock fell 12 percent to below $5 in early trading on April. 6, which increased the curiosity about the outlook for CEMI stock.

The FDA has cleared Chembio to start selling its rapid COVID-19 test under emergency use authorization. Pfizer and Moderna started rolling out their vaccines under similar emergency approval. Chembio has the inventory and will start shipping the test right away.

Chembio’s test produces results in 15 minutes. The test not only returns results quickly, but also differentiates COVID-19 from regular flu. Therefore, it can help doctors take appropriate action soon and help hospitals maximize their resources.

Many investors have added Chembio to their watchlist after seeing it surge after the rapid COVID-19 test commercial launch. The interest in CEMI's stock forecast has spiked. The outlook for Chembio stock leans bullish. The consensus target price of $9 implies a 60 percent upside. The high target price of $10 implies nearly an 80 percent upside.

Chembio generated revenue of $32.5 million in 2020. Entering the COVID-19 test market opens a massive new revenue opportunity for the company. The global COVID-19 diagnostic market is worth more than $84 billion. If the COVID-19 test business turns out to be a hit, Chembio stock will rise and reflect the success.

Some investors have started comparing Chembio to GameStop (GME) after seeing its stock rise sharply. GME soared more than 2,000 percent in early 2021 after investors on the Reddit community WallStreetBets sparked a short squeeze. The GME frenzy succeeded with the backing of SPAC king Chamath Palihapitiya and Tesla CEO Elon Musk. 

The GameStop frenzy succeeded because the stock was heavily shorted at more than 100 percent. However, CEMI stock lacks that key characteristic because it only has a short interest of 10 percent. 

COVID-19 vaccines might end the COVID-19 pandemic. However, the virus isn’t expected to go away. Tests will still need to be done to prevent another major outbreak. Chembio’s rapid COVID-19 test will be in demand long after the pandemic ends.

Finally, considering that CEMI stock currently trades about 65 percent below its recent peak, a window has opened for bargain hunters to enter this COVID-19 test stock at a discount.