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Here's Why You Should Retain Abiomed (ABMD) Stock For Now

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·4 min read
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Abiomed, Inc. ABMD is well poised for growth in the coming quarters, backed by strength in its Impella product line. A robust third-quarter fiscal 2022 performance, along with a few regulatory clearances, is expected to contribute further. Third-party reimbursement and pricing pressures persist.

Over the past year, this Zacks Rank #3 (Hold) stock has lost 6.5% compared with 10.8% fall of the industry. The S&P 500 has gained 14.6% in the same time frame.

The renowned global provider of medical products designed to assist or replace the pumping function of the failing heart has a market capitalization of $13.98 billion. The company projects 20% growth for the next five years and expects to maintain its strong performance. It has delivered an earnings surprise of 9.2% for the past four quarters, on average.

Zacks Investment Research
Zacks Investment Research

Image Source: Zacks Investment Research

Let’s delve deeper.

Strength in Impella: Abiomed’s flagship product line, Impella, has continued to be a growth driver, which raises our optimism. During its fiscal 2022 third-quarter earnings call, Abiomed confirmed that the pandemic has accelerated the rollout of its remote monitoring technology, Impella Connect. Presently, this technology is available in 1,564 hospitals worldwide. The company also confirmed that it recorded strength across its broad base portfolio, with Impella CP up 9%, Impella RP up 15% and Impella 5.5 up 65% in the reported quarter.

Regulatory Clearances: Abiomed has been riding on a suite of regulatory approvals of late, raising our optimism. The company, in January, received the FDA’s Early Feasibility Study (“EFS”) Investigational Device Exemption to Impella BTR (Bridge-to-Recovery). In Asia, Impella 5.5 with SmartAssist has received approval from Japan’s Pharmaceuticals and Medical Devices Agency and Hong Kong’s Medical Device Division. During its third-quarter fiscal 2022 earnings call, Abiomed confirmed that its Impella ECP received Category B status from the FDA, and that it has established its pivotal protocol.

Strong Q3 Results: Abiomed’s solid third-quarter fiscal 2022 results buoy optimism. The company saw strength in its global Impella revenues, which is impressive. In January, Abiomed announced successful results of the first-in-human EFS of the preCARDIA system. In November 2021, Abiomed announced favorable final results of the PROTECT III and Restore EF prospective studies. These developments raise our optimism on the stock. The company continued to witness a deleveraged balance sheet in the quarter under review.

Downsides

Pricing Pressures: Significant rise in healthcare costs has resulted in numerous initiatives and reforms undertaken by legislators, regulators and third-party payers to curb these costs, leading to a consolidation trend in the industry to aggregate purchasing power. With increasing consolidation, competition to provide products and services to industry participants has become and will continue to be intensive. This, in turn, has resulted, and will likely continue to result, in greater pricing pressures.

Third-Party Reimbursement: Abiomed depends on third-party reimbursement to its customers for market acceptance of its products. Sales of medical devices largely depend on the reimbursement of patients’ medical expenses by government healthcare programs and private health insurers. Without government reimbursement or third-party insurers’ payments for patient care, the market for Abiomed’s products will be limited.

Estimate Trend

Abiomed is witnessing a positive estimate revision trend for 2022. In the past 90 days, the Zacks Consensus Estimate for its earnings has moved 7.2% north to $4.34.

The Zacks Consensus Estimate for the company’s fourth-quarter fiscal 2022 revenues is pegged at $266.9 million, suggesting a 10.6% improvement from the year-ago quarter’s reported number.

Key Picks

A few stocks from the broader medical space that investors can consider are AMN Healthcare Services, Inc. AMN, Allscripts Healthcare Solutions, Inc. MDRX and Henry Schein, Inc. HSIC.

AMN Healthcare has an estimated long-term growth rate of 16.2%. AMN’s earnings surpassed estimates in the trailing four quarters, the average surprise being 19.5%. It currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AMN Healthcare has gained 33.8% against the industry’s 59.1% fall over the past year.

Allscripts, carrying a Zacks Rank #2, has an estimated long-term growth rate of 11.1%. MDRX’s earnings surpassed estimates in the trailing four quarters, the average surprise being 34.1%.

Allscripts has gained 25.9% against the industry’s 55.4% fall over the past year.

Henry Schein has an estimated long-term growth rate of 11.8%. HSIC’s earnings surpassed estimates in the trailing four quarters, the average surprise being 21.9%. It currently carries a Zacks Rank #2.

Henry Schein has gained 9.8% compared with the industry’s 6.2% rise over the past year.


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