Shares of Abingdon Health PLC (LON: ABDX) edged 4.32% higher today as buyers stepped in, extending the recent rally that followed its late April crash triggered by a profit warning due to the slow uptake of its COVID-19 test kits.
The company’s row with the British government regarding after cancelling its order to supply the UK Department of Health (DHSC) with its AbC-19T rapid test has also weighed on its shares, triggering the latest crash.
However, investors are showing confidence in Abingdon Health’s prospects, given the recent rally has lasted over ten days after bullish investors stepped in to prevent further losses to the company’s share price.
Still, the company faces significant obstacles. The government still owes it £6.7 million for the supply of one million tests proper to the contract cancellation, which could cripple it if the amount is not settled soon.
Abingdon Health is still working on growing its order pipeline. It is exploring some of the current opportunities available to it, but getting new substantial orders is quite challenging due to the slow uptake of its tests globally.
Furthermore, competition in the COVID-19 testing industry is heating up with other companies offering competing tests that are more widely accepted combined with the UK government’s adoption of a dynamic procurement strategy.
The company has downgraded its revenue guidance for the year. It faces significant financial risk if the British government does not settle the amounts owed soon, which largely depends on the outcome of the legal proceeding against the government regarding the order.
Given the above risks, I would not buy Abingdon Health shares at the moment until its fundamentals improve.*
*This is not investment advice.
Abingdon Health share price.
Abingdon Health shares edged 4.32% higher to trade at 72.50p rising from Friday’s closing price of 69.50p.