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Globus Medical (GMED) Hits New 52-Week High: What's Driving It?

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Globus Medical, Inc. (GMED - Free Report) scaled a new 52-week high of $78.15 on Jun 28, before closing the session marginally lower at $76.08.

The company’s shares have appreciated 63.4% over the past year, ahead of 25.3% growth of the industry it belongs to and 42.4% rise of the S&P 500 composite.

The company is witnessing an upward trend in its stock price, prompted by significant trend improvement amid post-pandemic recovery. The company’s strategy to focus on product development is encouraging. Moreover, the raised 2021 guidance buoys optimism in the stock. However, stiff competition and exposure to currency movement remain concerns.

Let us delve deeper.

Key Growth Catalysts

Prominent Trend Improvement: Following the initial pandemic-led downturn of the Globus Medical business, there has been a visible rebound in the company’s revenue trend that continued with a steady climb upward through the first quarter. In the quarter, revenues from enabling technologies surged 85.8% year over year. Given the challenging comps, the sequential improvement is more indicative of the healthy run of this business. As the economy returned to business in the third quarter, the capital teams were able to begin rebuilding pipelines and moving deals along. Many of these deals closed in October and enabled the company to sell more robots in October than it did for the entire third quarter.

Steady Pace of Product Development: In line with the company’s business strategy to focus on its integrated product development, Globus Medical is consistently making efforts to innovate plus research and develop. Per the company, its team-oriented approach, active surgeon input and demonstrated capabilities position it well to maintain a rapid rate of product launches. The company introduced two products during the first quarter – the first being CORBEL Lateral ALIF system comprising a novel retractor and an innovative interbody spacer. The second is CREO ONE, the market's first pedicle screw designed specifically for robotic spine surgery with ExcelsiusGPS.

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Raised Guidance:  Investors are upbeat about the company’s raised guidance for full-year 2021. The company now expects full-year net sales at $925 million, calling for 5.1% growth from the previously guided figure of $880 million while adjusted earnings per share in 2021 is expected to be $1.89, suggesting 3.3% growth from the previously guided figure of $1.83.

Downsides

Competitive Landscape: The presence of a large number of players made the musculoskeletal devices market intensely competitive. The orthopedic industry in particular is highly competitive with the presence of larger players like Zimmer Biomet, Stryker, Johnson & Johnson’s DePuy, Smith & Nephew and Medtronic.

Exposure to Currency Movement: Globus Medical records 15.8% in sales from the international market. A significant portion of the company’s foreign revenues and expenses is generated in Japan, the Euro zone, the United Kingdom and Australia. This makes it highly vulnerable to currency fluctuations.

Zacks Rank and Key Picks

Currently, the company carries a Zacks Rank #3 (Hold).

A few better-ranked stocks from the broader medical space are Envista Holdings Corporation (NVST - Free Report) , BellRing Brands, Inc. (BRBR - Free Report) and IDEXX Laboratories, Inc. (IDXX - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.

Envista Holdings has an estimated long-term earnings growth rate of 26%.

BellRing Brands has an estimated long-term earnings growth rate of 22%.

IDEXX Laboratories has a projected long-term earnings growth rate of 20%.

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