Here's Why You Should Hold on to Penumbra (PEN) Stock for Now
Penumbra, Inc.'s PEN is well poised for growth in the coming quarters. It is backed by consistent revenue growth momentum, courtesy of extraordinary patient outcomes with Lightning Flash, Lightning Bolt 7 and RED 72 with SENDit technology. The company’s vascular and neuro businesses are showing encouraging growth trends. Yet, currency movements and a challenging competitive landscape affect the top line.
In the past year, the Zacks Rank #3 (Hold) stock has gained 16.2% compared with the industry’s 1.3% rise and the S&P 500’s 19.2% rise.
The global healthcare provider company has a market capitalization of $8.23 billion. It surpassed estimates in the trailing four quarters, the average surprise being 94.2%.
Key Growth Catalysts
Substantial Portfolio Expansion: Penumbra is still in the early stages of its journey to bring the company’s proprietary thrombectomy technologies to patients in the United States and internationally. The company’s consistent revenue growth momentum is being driven by the extraordinary outcomes Penumbra is witnessing in patients treated with Lightning Flash, Lightning Bolt 7 and RED 72 with SENDit technology.
According to the company, Lightning Flash's transformative power, speed, safety, and efficacy profile is the biggest driver of the exceptional early adoption of the product. In Lightning Bolt 7, Penumbra is seeing an acceleration of Lightning Bolt 7 cases in the last two months of the second quarter as conversion from surgery, lytics and other mechanical thrombectomy products are gaining momentum.
Robust Vascular Business Growth: Penumbra is demonstrating strong growth within the company’s Vascular business, banking on the rapid increase in sales of the company’s vascular thrombectomy products in the United States.
Lightning Flash is also driving an acceleration in Penumbra’s U.S. vascular thrombectomy franchise, which grew nearly 24% year over year in the second quarter. Additionally, the company successfully launched the Lightning Bolt 7 arterial thrombectomy system in June following its FDA clearance in March 2023. The company expects to see a robust growth trajectory in the Vascular arm in the next five years and beyond and has accordingly raised its 2023 revenue forecast significantly.
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Improving Neuro Trend: Within the Neuro franchise, Penumbra is witnessing an acceleration in the company’s stroke business. Further, it is experiencing strong customer uptake of RED 72 (with the proprietary SENDit technology), RED 43 and BMX81. These products represent meaningful advances in the trackability of 0.072-sized aspiration catheters and distal clot removal.
In the second quarter, a substantial increase in the company’s Neuro product sales was driven by the rise in sales of neuro thrombectomy products and neuro access products, which globally increased by 32.4% and 27.6%, respectively.
Downsides
Foreign Exchange Impacts Sales: A significant portion of Penumbra’s sales and costs are exposed to changes in foreign exchange rates. In 2022, approximately 30.2% of the company's consolidated revenues came from the non-U.S. markets. The company uses multiple foreign currencies, including the euro and Japanese yen. Changes in those currencies relative to the U.S. dollar will impact its sales, cost of sales and expenses, and consequently, net income.
Tough Competitive Landscape: The medical device industry is intensely competitive, subject to rapid change and significantly affected by new product introductions and other market activities of industry participants. Penumbra competes with several manufacturers and distributors of neuro and vascular medical devices.
Estimate Trends
In the past 90 days, the Zacks Consensus Estimate for its fiscal 2023 earnings has moved up 10.9% to $1.73.
The Zacks Consensus Estimate for fiscal 2023 revenues is pegged at $1.06 billion, suggesting a 10.9% rise from the year-ago reported number.
Key Picks
Some other top-ranked stocks in the broader medical space are DaVita Inc. DVA, Quanterix QTRX and Align Technology ALGN, each carrying a Zacks Rank #2.
DaVita has an estimated long-term growth rate of 12.7%. DVA’s earnings surpassed estimates in three of the trailing four quarters and missed once, with an average surprise of 21.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DaVita has gained 25.5% against the industry’s 8.9% decline in the past year.
Estimates for Quanterix’s 2023 loss per share have remained constant at 97 cents in the past 30 days. Shares of the company have surged 141.5% in the past year compared with the industry’s fall of 5.6%.
QTRX’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 30.39%. In the last reported quarter, it posted an earnings surprise of 55.56%.
Estimates for Align Technology’s 2023 earnings have moved up from $8.77 to $8.78 per share in the past 30 days. Shares of the company have increased 27% in the past year compared with the industry’s rise of 14.3%.
ALGN’s earnings beat estimates in three of the trailing four quarters and missed in one. In the last reported quarter, it posted an earnings surprise of 9.90%.
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Quanterix Corporation (QTRX) : Free Stock Analysis Report
