The Avacta share price (AVCT) has climbed 1,400%. Here’s what I’d do now

The biotech sector has been one to watch since Covid-19 arrived. Could the Avacta Group share price be the one to beat in 2021 after its big 2020 surge?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Companies involved in Covid-19 testing have done well during the pandemic — and that includes Avacta Group (LSE: AVCT). The company released an update on its SARS-CoV-2 antigen lateral flow test on Monday, and the shares picked up 4% on the day. But that’s only a small part of the story — the Avacta share price has climbed a staggering 1,400% since the beginning of 2020.

We do need to see that in perspective, mind. Before Covid-19 turned up, there obviously wasn’t much call for Covid-19 testing. And Avacta was getting along with its cancer therapies and diagnostics. So a big boost to the Avacta share price since then is perhaps not surprising. But can it be sustained, and is there more growth to come?

First, let’s look at the latest news. The company mentions “recently announced data from a clinical study on 98 positive COVID-19 samples that demonstrate excellent performance in identifying the SARS-CoV-2 virus across a broad range of viral loads“. Avacta goes on to say it “expects to receive confirmation of the registration of the AffiDX in-vitro diagnostic device in the coming days, which will allow the group to immediately place the test on the market“.

Should you invest £1,000 in C3.ai right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if C3.ai made the list?

See the 6 stocks

Better than the competition

Chief executive Dr Alastair Smith added that, compared to two other commercially available lateral flow antigen tests, “the AffiDX test had better clinical sensitivity across the range of Ct values tested and, in particular, at lower viral loads“.

I take two immediate thoughts from that. The first is that the Avacta share price has gone on its sky-high, 1,000%+, ride even before the company had a saleable Covid-19 test. Wow! But secondly, if the Avacta test works better at lower viral loads, it could turn out to be very important indeed. Current lateral flow tests are not as accurate as laboratory tests that can take up to a couple of days to perform.

But where will the Avacta Group share price go for the rest of 2021 and beyond? Fellow Motley Fool writer Andy Ross recently suggested we could see another strong run in May. He could be right. I wouldn’t be surprised to see another leap upwards when the AffiDX test gets its expected approval. So would I buy the shares now?

Well, if ever there was a case where ‘past performance is no guide to future performance’ was apt, this is surely it. And I would not invest based solely on the short-term performance of anything. Saying that, there’s a good chance that Covid-19 will be with us long-term, just like influenza. And I can see demand for Covid-19 testing continuing for many more years.

Avacta share price valuation

But there’s another thing that puts me off high-flying growth shares like this. Avacta reported an operating loss in 2020, largely due to R&D spend. That makes it impossible for me to put any kind of rational valuation on the company. Is today’s price good value compared to future profits? Or is the Avacta share price pumped up much higher than it’s worth?

I have no idea, and I’ll keep away from the risk that comes with such uncertainty. But for any brave investors taking the chance, I wish them well.

Should you invest £1,000 in C3.ai right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if C3.ai made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Two business people sitting at cafe working on new project using laptop. Young businesswoman taking notes and businessman working on laptop computer.
Investing Articles

£10,000 invested in the FTSE 100 at the start of 2025 is now worth…

The FTSE 100 has bounced back from April’s tariff sell-off. Roland Head crunches the numbers and highlights a stock to…

Read more »

Passive and Active: text from letters of the wooden alphabet on a green chalk board
Investing Articles

Up 20% with a 9% yield! This stock remains my top passive income earner

When it comes to earning passive income through dividend investing, this major FTSE 100 insurer is the undeniable winner in…

Read more »

4 Teslas in a parking lot at a charger station
Investing Articles

Tesla vs Ferrari: which stock is leading the race in 2025?

This writer digs into the Q1 numbers to see whether his decision to choose Ferrari over Tesla stock has been…

Read more »

Businessman with tablet, waiting at the train station platform
Investing Articles

Here’s the growth forecasts for Next shares through to 2028!

Next's shares have risen in price again after another forecast-raising trading statement. Is the FTSE 100 company a white hot…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Up 145%, this investment trust has a P/E ratio of 10. Is it still a bargain?

The long-term track record of this investment trust has been excellent. Our writer thinks it could still be a bargain…

Read more »

Bournemouth at night with a fireworks display from the pier
Investing Articles

These 3 dividend shares are on fire but they’re still dirt-cheap and pay piles of income!

Harvey Jones is hugely impressed by 3 FTSE 100 dividend shares that have managed to deliver on two key fronts,…

Read more »

DIVIDEND YIELD text written on a notebook with chart
Investing Articles

9% yield! Is this one of the best dividend stocks to consider buying right now?

With signs the worst for it might be over, dividend investors should add B&M European Value to their lists of…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

Down 26% in 3 months! What’s going on with the Alphabet share price?

Stock market investors sold off Alphabet (NASDAQ:GOOG) shares heavily yesterday. Is this a worry or a timely buying opportunity to…

Read more »