Hologic Sees a Windfall From COVID-19 in Fiscal 2020

Hologic wrapped up the fiscal year with strength thanks to demand for COVID-19 diagnostic tests, and we expect to modestly raise our fair value estimate once we incorporate full-year results in our projected cash flows. In the fourth quarter, Hologic’s consolidated revenue growth of 54% was driven by blow-out results from its molecular diagnostics business, which more than offset double-digit declines in most other product categories, including breast health, gynecological surgery, and skeletal health. We remain confident that Hologic’s narrow economic moat, partially stemming from switching costs, is intact. With the pandemic providing a strong tailwind for expanding Hologic’s installed base of Panther platforms, we gave some thought to turning the firm’s moat trend positive. However, considering the overwhelming demand we’ve seen for all molecular diagnostic platforms across companies this year, we don’t believe Hologic’s position is strengthening any more than any of its rivals.