Abiomed: The Stock That Surged by 909%

TipRanks BlogTipRanks BlogJuly 14, 2019

Five years
after the S&P 500 reached 2,000, the index rose to a historic high of over 3,000
on July 10. CNBC compiled a list of the 10 stocks that were the driving force
behind this rally based on the stock’s percentage gain since August 26, 2014 when
the index reached 2,000. Abiomed Inc. (ABMD) topped
the list, with share prices growing by an impressive 909%. Ahead of their July
25 earnings release, some analysts are saying there’s still more room for
gains.

Using TipRanks, we explore
how Abiomed is pulling off this huge growth.

A Leading Medical Device Manufacturer

Abiomed is
one of the leading medical device makers, specializing in heart pumps used for
the treatment of cardiac diseases. The company’s Impella devices are used to
improve the safety of high-risk heart surgeries and to help patients recover
from a heart attack.

With the risk of heart disease increasing worldwide, there is an urgent need for cardiovascular medical devices. Abiomed’s innovative Impella pump is the smallest heart pump available. The technology is made up of percutaneous, catheter-based devices offering hemodynamic support to the heart. Its product pipeline offers additional products that management expects will grow the company’s customer base by over 300,000 patients per year.

Management Predicts a
Turnaround After Q4 Results

The company’s revenue increased to $207 million in Q4 2019, up from $174 million in Q4 2018. GAAP net income rose 101% from $37 million to $74 million over the same time period. Its gross margin also increased by 50 basis points, reaching 83%.

While these figures demonstrate growth, the company fell short of financial targets outlined in their guidance for Q4. Management originally forecasted 25% revenue growth compared to the 19% that was reported. The slowed growth rate can be attributed to a confusing letter sent by the FDA in February. The letter led some healthcare providers to mistakenly believe that there were safety issues with the Impella RP and that it was going to be recalled.

Michael Minogue, the company’s CEO, expressed his disappointment over the Q4 results but expects things to turn around in the remainder of the calendar year. He added, “However, Abiomed had a solid year with 30% growth and improvement in margins. Most importantly, Abiomed’s clinical support, training, and education helped improve patient outcomes in both high-risk PCI and cardiogenic shock.”

Looking Forward

For fiscal
2020, management is expecting to see revenue reach between $900 million and
$945 million, up 17% to 23% from fiscal 2019. The company forecasts GAAP
operating margin to be within the range of 29% to 31%.  

Five-star analyst, Matthew O’Brien, thinks that now is the right time to buy. While the company had a weaker than expected fourth quarter, O’Brien believes Abiomed could “get to steady 20% plus revenue growth for the next seven years”. He adds, “It’s my favorite large cap name and I believe the shares could offer significant upside from current levels.” The analyst maintained his Buy rating on the stock and $320 price target.

Another top analyst, Raj Denhoy, agrees that
the issues from Q4 have been addressed. “The company’s fiscal 2020 guidance of
17%-23% seems doable,” he said. While he lowered his price target from $460 to
$330, he maintained his Buy rating on the stock.

The Final Verdict

Thanks to its niche products and long-term growth prospects, the Street is bullish on the stock. The company has a ‘Strong Buy’ analyst consensus and $338 average price target, suggesting upside potential of 29%.

Analyst Ratings & Price Targets on ABMD

The post Abiomed: The Stock That Surged by 909% appeared first on TipRanks Financial Blog.

Source: TipRanks Blog


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