We're Calling Up This Healthcare Company From the Bullpen
We'll look to build out this position on pullbacks or signs margins are expanding quicker than expected.
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* We are calling up diagnostic health company Labcorp from the Bullpen with a $235 price target.
* Owning LH will capture the expanding diagnostic testing market and Labcorp’s growing offering in it, while adding to our dividend income stream.
* We'll look to build out the position on pullbacks or signs margins are expanding quicker than expected.
| Symbol | Transaction Type | #Shares Traded | Recent Price ($) | Shares Owned After Trade | % Portfolio |
|---|---|---|---|---|---|
LH | Buy | 165 | 199.25 | 165 | 0.8 |
After you receive this Alert, we will start a new position in the shares of Laboratory Corporation of America LH by buying 165 shares at $199.25. Following the trade, LH shares will account for 0.8% of the portfolio’s holdings.
When we added Labcorp. shares to the Bullpen we did so as part of our Aging Population investment theme, sharing we would want to see a more favorable risk-to-reward entry point before calling the shares up to the portfolio.
Despite consensus EPS expectations for this year and next inching higher over the last two months, LH shares have fallen from their 2023 year-end high back to the level where we added them to the Bullpen. Today, consensus 2024 EPS stands at $14.82 compared to $14.61 three months ago compared to $13.56 last year.
With the last of the pandemic headwinds fading, and favorable prospects for the diagnostics market, we are taking out a starter position in LH shares with an initial price target of $235. Even though the shares are oversold per a technical look at the daily chart, we would look to build out the position more aggressively closer to $190 and even more so at modestly lower levels.
The net upside between those two price levels has us beginning LH with a Two rating. We will set our panic point at $170, but as the shares move higher, we intend to raise that level.
Our original attraction to LH shares was the combination of the ageing population driving diagnostic testing growth and the increasing array of diagnostic testing as well. That combination is expected to drive the healthcare testing services market to $12.6 billion by 2029, from $7.4 billion this year, according to Markets and Markets. To augment its position in oncology, women's health, autoimmune diseases, and neurology, the company has been expanding through acquisitions and partnerships with health systems and regional local labs.
Earlier this month, Labcorp expanded its precision oncology portfolio with the launch of Labcorp Plasma Detect, a solution for identifying early-stage colon cancer in patients who are at increased risk of recurrence after surgery or chemotherapy.
In March, Labcorp acquired certain operations from Opko Health OPK subsidiary BioReference Health, which should add $100 million in incremental revenue. The acquired business specializes in clinical diagnostics and reproductive and women’s health and includes patient service centers, customer contracts, and other assets.
Also in March, Labcorp launched its weight loss management portfolio, which includes a multitude of testing solutions that will help patients as they progress in their weight loss journey. This should position Labcorp and its shares as an indirect beneficiary of weight loss drug adoption, which means we will be keeping a closer watch on that market as well as progress from
In terms of calendar items, Labcorp will report its quarterly results on April 25 and by starting this position today, we will qualify for the record data for its next quarterly dividend. That date is May 28, and the payment date for the company’s $0.72 per share quarterly dividend is June 12.
At the time of publication, TheStreet Pro Portfolio had no position in the securities mentioned.
(Please note that we are looking to execute these trades at or near the share price mentioned above. Once the trade is completed, subscribers can see the trade's executed price here. Be sure to toggle the chart to sort by Purchase Date.)
