If you thought COVID‐19 was “so 2020”, think again as the Sonic Healthcare Limited (ASX: SHL) share price surged higher on the first trading day of the New Year.
The SHL share price jumped 3.6% to $33.33 in morning trade. This makes the medical diagnostics group the top performer on the S&P/ASX 200 Index (Index:^AXJO).
In case you were wondering, the Pro Medicus Limited (ASX: PME) share price and Evolution Mining Ltd (ASX: EVN) share price are in second and third spots, respectively.
COVID testing blitz boosts SHL share price
Interest in Sonic Healthcare is probably given a boost by the new COVID outbreak in Sydney leading up to Christmas.
While authorities are doing a commendable job in suppressing the outbreak, the virus has spread to neighbouring Victoria. The list of “hotspots” in both states are also growing and governments in both states are urging residents to get tested.
Pressure builds to boost testing rates
The number of tests done in New South Wales in the last 24 hours stands at 22,275. Deputy Premier John Barilaro says testing rates are too low and he wants this to increase to as much as 50,000 a day, reported the Australian Financial Review.
Testing capacity at Victoria is also being ramped up with many turned away after waiting in line for hours to get a test.
There is a very real chance that other states will be joining the rush to test residents.
Rush for testing sites could spread
Queensland Health detected traces of COVID-19 at two more sites in South East Queensland on New Year’s Eve.
The new sites are Bundamba in West Moreton and Merrimac on the Gold Coast. Wastewater tests last week also revealed positive results at seven sites across the state. These include Victoria Point, Oxley Creek, Goodna, Fairfield, Cairns North, Redcliffe and Nambour.
The only way for authorities to get on top of the COVID outbreak is to undertake mass testing. This should be good news for Sonic Healthcare as its labs are among the facilities used by state governments.
Sonic Healthcare benefits from COVID tests
Sonic also undertakes testing in other countries, including the United States. Global cases of COVID-19 have continued to soar despite the approval and roll-out of a vaccination program.
The Sonic Healthcare share price actually came under pressure on the vaccine news as many assumed the number of tests would fall significantly as the vaccinations in the US and UK commenced.
But the number of shots administered are much smaller than originally forecasts and it seems like the naysayers were wrong in their bearish assumptions.
Foolish takeaway
On the flipside, the surge in COVID testing could be a double-edged sword for Sonic. Other routine tests that it usually undertakes will have to make way for the deadly pandemic.
Nonetheless, Sonic is still seen to be better placed to benefit from the fresh COVID outbreak than its peers, like hospital operator Ramsay Health Care Limited Fully Paid Ord. Shrs (ASX: RHC) and drug developer CSL Limited (ASX: CSL).
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Returns as of 6th October 2020
More reading
- Disappointments from the ASX 200’s best ever December quarter
- 2 ASX blue chip shares tipped as buys for 2021
- Top ASX shares to buy in January 2021
- Here’s how the S&P/ASX All Technology Index fared in 2020
- What happened to the CSL (ASX:CSL) share price in 2020?
Brendon Lau owns shares of CSL Ltd. and Evolution Mining Limited. Connect with me on Twitter @brenlau.
The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus Ltd. The Motley Fool Australia has recommended Ramsay Health Care Limited and Sonic Healthcare Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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