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Analyst Blog

On Jun 17, we downgraded cardiac assist devices maker, Abiomed (ABMD - Analyst Report), to Neutral, as we believe that the positives from its last earnings have already been factored into the current stock price.

Why the Downgrade?

Estimates for Abiomed have been declining since it reported fourth quarter fiscal 2013 results on May 2. Following the results, the Zacks Consensus Estimate for fiscal 2014 slipped 25% to 33 cents per share. The Zacks Consensus Estimate for fiscal 2015 has also declined significantly (down 27% to 54 cents per share). With the Zacks Consensus Estimate for both fiscal 2014 and 2015 going down, the company now has a Zacks Rank #3 (Hold).

The global healthcare environment is still challenging. Thus, Abiomed’s significant exposure in Europe remains a cause of concern. Moreover, the company is facing regulatory issues in the U.S. regarding its Impella products. Research and development initiatives to meet regulatory requirements might add pressure on the company’s margins. Competition from other industry leaders such as Thoratec (THOR - Analyst Report) and fluctuating foreign currency remain additional headwinds.

On the positive side, Abiomed enjoys a strong demand for its Impella products. Multiple near-term drivers, including new products and clinical trials, should further boost the use of Impella. However, the company’s sole dependence on a single product line is risky, as any kind of disruption or delay in Impella sales will adversely affect the business

Abiomed’s fourth-quarter fiscal 2013 revenues of $43.7 million as well as EPS of 9 cents beat the Zacks Consensus Estimate of $42 million and 7 cents, respectively. The company posted record revenues and patient support in fiscal 2013. However, we do not see any near-term catalysts that could boost the share price going forward.

Other Med-Tech Stocks to Consider

While we remain on the sidelines regarding Abiomed, other stocks such as Natus Medical (BABY - Snapshot Report) and Myriad Genetics (MYGN - Analyst Report) warrant a look. These stocks carry a Zacks Rank #1 (Strong Buy).
 

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