Should I buy Novacyt shares for the long term or are they risky now?

A £3,000 investment in January 2020 would have inflated to just over £257,000 with Novacyt. But the stock’s been volatile lately, so would I buy it now?

| 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.

Medical diagnostics company Novacyt (LSE: NCYT) has been one of the stock market darlings of 2020. The company scored some big contracts to supply Covid-19 test kits, causing revenue and profits to shoot higher during the year.

Novacyt shares exploded higher in 2020

But the firm’s business success is nothing compared to the success of the stock. At the beginning of January, the share price was around 14p, but it peaked near 1,200p in October. That move must rank as perhaps the fastest multi-bagging investment ever experienced by some lucky (or perhaps prescient) shareholders. Indeed, a £3,000 investment in January would have inflated to just over £257,000.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

I can only dream about returns like that from my investments. But it would have been tricky for any investor to have nailed down profits that big in percentage terms with Novacyt. And that’s because the share price has been choppy lately. As I write, it’s down to 780p. And every vaccine announcement from the likes of Pfizer and Moderna has hammered the shares.

To give some indication of the volatility shareholders are enduring now, the first announcement from Pfizer slammed Novacyt down by around 50% over two trading days! Luckily, it bounced back a fair way and has been up and down since. However, it seems to me that the overriding trend may be down.

Nevertheless, the news flowing from Novacyt remains positive and the directors appear to think the company has a bright future. And although the Covid-19 testing party remains far from over, the company is developing other business lines too. A few of the directors even backed their confidence by buying shares in the company in the open market after the price had fallen.

Undeniable headwinds

However, a big part of the company’s recent operational success is down to the pandemic. So, it’s difficult to view progress with vaccines as anything other than a headwind for the business in the short-to-medium term. But I acknowledge that, even with a vaccine, there’ll be a need for ongoing testing.

However, one of the biggest risks for shareholders now, as I see it, is the potential for more vaccine announcements in the weeks and months ahead. After all, many companies around the world are throwing resources at the challenge of Covid-19 vaccine development.

Another problem with Novacyt, for me, is the share has been extremely popular in the investing community. Indeed, share-focused internet bulletin boards have seen frenetic activity relating to the prospects of Novacyt.

And I view that situation as a contraindicator when it comes to appraising the attractions of the stock now. Indeed, with so much investor interest, there’s a good chance the company may be more than fully valued in respect of its longer-term growth prospects.

Novacyt could, at some point, make a decent long-term investment for me. But I’ll wait for a much lower entry point before buying the stock because I think it’s likely to go down first. Indeed, without Covid-19, I’m sure the valuation would be too high now. And I’m hoping very much for a world without a Covid-19 pandemic as soon as possible!

Meanwhile, I'm keen on this share:

The high-calibre small-cap stock flying under the City’s radar

Adventurous investors like you won’t want to miss out on what could be a truly astonishing opportunity…

You see, over the past three years, this AIM-listed company has been quietly powering ahead… rewarding its shareholders with generous share price growth thanks to a carefully orchestrated ‘buy and build’ strategy.

And with a first-class management team at the helm, a proven, well-executed business model, plus market-leading positions in high-margin, niche products… our analysts believe there’s still plenty more potential growth in the pipeline.

Here’s your chance to discover exactly what has got our Motley Fool UK investment team all hot-under-the-collar about this tiny £350+ million enterprise… inside a specially prepared free investment report.

But here’s the really exciting part… right now, we believe many UK investors have quite simply never heard of this company before!

Click here to claim your copy of this special investment report — and we’ll tell you the name of this Top Small-Cap Stock… free of charge!

Kevin Godbold has no position in any share 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.

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 considered, so you should consider taking independent financial advice.

More on Investing Articles

Lady researching stocks
Investing Articles

Here’s why I’m avoiding this dirt-cheap dividend penny stock!

A dirt-cheap, dividend-paying penny stock with a vast presence sounds good on the surface. This Fool isn't convinced, however.

Read more »

Asian Indian male white collar worker on wheelchair having video conference with his business partners
Investing Articles

These top income stocks look dirt cheap to me. I’d buy them now

I'm taking advantage of today's stock market weakness to load up on top value income stocks

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

Excessive stock trading erodes long-term gains!

Are high trading fees eating away at your returns? Research suggests that excessive stock trading could be to blame.

Read more »

Young woman sat at laptop by a window
Investing Articles

Pearson shares are up 25% since the market correction! Should I buy now?

Why have Pearson shares rallied since the market correction? This Fool looks at the educational provider in more detail and…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Recession ready! I’d buy these FTSE 100 stocks for tough times

Jon Smith explains some of his favourite options for defensive FTSE 100 stocks that he's thinking of adding to his…

Read more »

A graph made of neon tubes in a room
Investing Articles

Down 45%, are these UK shares no-brainer bargains right now? 

Several top UK shares are down significantly and two companies on my list look like possible attractive buys right now.…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

I bought these 2 FTSE 100 shares two years ago. Should I now add to them?

Andrew Woods asks if he should add to his current holding in these two FTSE 100 shares ahead of a…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Has the Deliveroo share price bottomed?

The Deliveroo share price (LON:ROO) is down nearly 60% in 2022. Paul Summers asks whether it's now hit bargain territory.

Read more »