Abiomed, Inc. (ABMD - Free Report) is currently one of the top-performing stocks in the MedTech space. The company has a market capitalization of approximately $18.34 billion. The company has continued to gain from its flagship Impella product line but the gross margin remains under pressure.
The Zacks Rank #3 (Hold) stock has skyrocketed 169.1% against the industry’s rise of 4.6% in a year’s time.
Here we take a quick look at the major factors that have been plaguing Abiomed and discuss the factors that ensure near-term recovery.
In the first quarter of fiscal 2019, Abiomed’s gross margin was 82.9%, down 600 basis points (bps) year over year. Per management, the downside was mainly caused by product and geographic mix as well as incremental manufacturing investments to support growth initiatives.
In fact, in the fourth quarter of fiscal 2018, gross margin was 82.7%, down 190 bps year over year.
We believe a competitive industry exerts pricing pressure on Abiomed, thereby negatively impacting its margin.
What’s Favoring the Stock?
Impella Momentum Continues
Impella, the world's smallest heart pump, has been a key driver of Abiomed’s top line.
In the first quarter of fiscal 2019, Impella adoption in the Protected PCI and cardiogenic shock grew 24% and 37%, respectively. Per management, Impella grew favorably in Japan and contributed $2.6 million to revenues.
In fact, in July, the company received the Central Drugs Standard Control Organization (CDSCO) approval in India for its flagship Impella 2.5, Impella CP and Impella 5.0 heart pumps. (Read More: Abiomed Gets CDSCO Nod for Impella Heart Pumps in India)
Abiomed raised its fiscal 2019 revenue guidance.
The company expects total revenues in the range of $755-$770 million, up from the previous guidance of $740-$770 million. This reflects an increase of 27-30% over the last fiscal. Notably, the Zacks Consensus Estimate for revenues is pegged at $768.2 million, which lies within the guided range.
We expect the trend to continue in the quarters ahead.
Undeterred by persistent issues, analysts are optimistic about Abiomed.
For current-quarter revenues, the Zacks Consensus Estimate is pinned at $175.3 million, reflecting year-over-year growth of 32%.
The same for earnings stands at 73 cents per share, showing growth of 65.9% year over year.
Additionally, the stock has a Growth Score of A. This reflects possibilities of outperformance over the long haul. Our research shows that stocks with a Growth Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) are better picks than most.
A few better-ranked stocks in the broader medical space are athenahealth (ATHN - Free Report) , Intuitive Surgical (ISRG - Free Report) and Masimo Corporation (MASI - Free Report) .
athenahealth has a long-term expected earnings growth rate of 17.6%. The stock sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgical’s expected long-term earnings growth rate is 14.7%. The stock carries a Zacks Rank #2.
Masimo’s long-term earnings growth rate is projected at 14.8%. The stock carries a Zacks Rank #2.
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