The research firm noted that post-pandemic utilization rates have remained high, and Labcorp is positioned to capitalize on this trend through its core diagnostics business.

A Wall Street analyst issued contrasting ratings on Tuesday for two major diagnostic testing companies, upgrading shares of Laboratory Corp. of America Holdings while downgrading Quest Diagnostics, citing diverging margin trends and earnings outlooks.

According to The Fly, Citi raised its rating on Labcorp to ‘Buy’ from ‘Neutral’ and increased its price target to $300 from $250, implying more than 16% upside from the stock’s last closing price. 

The research firm noted that post-pandemic utilization rates have remained high, and Labcorp is positioned to capitalize on this trend through its core diagnostics business. 

While the recent $239 million acquisition of bankrupt genetic testing company Invitae will initially be dilutive to margins in fiscal 2025, Citi expects it to reach breakeven and eventually become accretive. 

The analyst also pointed to signs of a gradual recovery in Labcorp’s Early Development business, which has faced multiple quarters of headwinds.

Labcorp recently reported strong fourth-quarter results, posting adjusted earnings of $3.45 per diluted share, up from $3.30 a year earlier and surpassing analysts’ expectations of $3.05. 

Revenue came in at $3.33 billion, exceeding the consensus estimate of $3.31 billion. 

For 2025, the company expects adjusted earnings per share (EPS) between $15.60 and $16.40, with revenue projected between $13.88 billion and $14.05 billion. 

Despite the upgrade, sentiment on Stocktwits has remained largely ‘neutral’ with low message volume. 

LH sentiment and message volume as on March 4 | source: Stocktwits

One trader pointed to a key resistance level near $250 as a potential breakout point.

In contrast, Citi downgraded Quest Diagnostics to ‘Neutral’ from ‘Buy’ while maintaining its $185 price target. 

The research firm acknowledged that Quest is benefiting from strong utilization trends but expressed concerns over margin pressures related to its recent acquisitions. 

The company’s $985 million purchase of Canadian lab services provider LifeLabs and its $450 million acquisition of cancer test developer Haystack are expected to weigh on earnings growth. 

Citi argued that Quest’s current valuation multiple may not be sustainable given these risks.

Retail sentiment on Stocktwits has been mixed, with some traders growing less bearish over the past month despite low overall message volume. 

DGX sentiment and message volume as on March 4 | source: Stocktwits

Concerns have surfaced about potential competitive threats, particularly after telehealth company Hims & Hers acquired an at-home lab testing provider, raising questions about market share risks for Quest.

Labcorp shares have risen more than 11% year to date and trade at a trailing 12-month price-to-earnings multiple of 29.1x. Quest, trading at a multiple of 22.8x, has gained over 15% this year.

For updates and corrections, email newsroom[at]stocktwits[dot]com.<