Shockwave Medical is Thursday's IBD Stock Of The Day as SWAV stock soars closer to a breakout after the company's big earnings beat earlier this week.
Shockwave sells systems that "crack" hardened calcium in the arteries. Its devices can handle calcifications in the coronary and peripheral arteries. The peripheral arteries are in the arms and legs. Calcium is hardened plaque in the arteries and increases the risk of heart attacks and clots.
Needham analyst Mike Matson says Shockwave is about 6% penetrated into the $8.5 billion market for intravascular lithotripsy. The technology uses sonic pressure waves to crack calcifications, rather than a small drill to dig through them. The latter is a standard treatment called atherectomy.
"Coronary and peripheral sales both beat consensus with U.S. coronary driven by increased penetration into existing accounts and U.S. peripheral driven by all products and vessel beds," Matson said in a note to clients this week.
Matson boosted his price target on SWAV stock to 325 from 283. He has a buy rating on shares.
Shockwave jumped 4.7% Thursday to close at 302.68 on the stock market today. On Friday, shares dipped 1%.
SWAV Stock Tops An Early Entry
Shockwave shares are within striking distance of a buy point at 300.10 out of a cup-with-handle base, according to MarketSmith.com. The base is deeper than normal, but the handle has good form.
SWAV stock is also 8% above its 21-day moving average, clearing an early entry near 293. Investors could buy now around the early entry and add shares if Shockwave moves above the 300.10 buy point.
Shockwave stock is benefiting from the company's bullish growth. In the first quarter, sales rocketed 72% to $161.1 million, easily beating Wall Street's call for $147.3 million. Earnings more than doubled on a year-over-year basis, hitting $1.03 a share. That soundly beat estimates for 79 cents.
Coronary sales surged 62% after Shockwave launched its new device, dubbed C2 Plus, outside the U.S.
"Management noted that early feedback has been very positive and that they have seen C2 Plus used in long calcified segments with complex lesions," Matson said.
Matson notes C2 Plus can use a maximum of 80 electrical pulses to break apart calcifications. More than 70% of C2 Plus cases to date have hit that maximum. This indicates physicians are taking advantage of the enhanced capabilities of C2 Plus vs. the original C2, he said.
This could be a promising indicator for demand when Shockwave launches the new system in the U.S. in the fourth quarter.
Peripheral sales rocketed almost 98% in the U.S. and more than 133% abroad.
SWAV stock investors are now watching for how the launch of the new L6 system in the U.S. in April will impact second-quarter sales. Shockwave designed the L6 system for larger vessels, giving it "a more uniform, high energy profile for large vessel lesions," Matson said.
Top-Notch Medical Stock
Shockwave also raised its outlook for the year and now expects $700 million to $720 million in sales, up 43%-47%. Previously, the company called for $660 million to $680 million in sales. The new prediction is well above analysts' earlier estimate for $671.5 million in sales.
Since then, SWAV stock analysts have revised their forecast to $709.9 million in sales. In subsequent years, they predict annual sales will accelerate, topping $1 billion for the first time in 2025, according to FactSet.
Adjusted earnings are on a similar trajectory. Analysts estimate profit will hit $3.83 per share this year on its way to $6.02 a share in 2025.
SWAV stock is highly rated by IBD, with a Relative Strength Rating of 96 out of a best-possible 99. Shares rank in the top 4% of all stocks when it comes to 12-month performance, according to IBD Digital. The medical stock also has a perfect Composite Rating of 99, which tracks fundamental and technical metrics.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
