Why Shockwave Medical Stock Rallied as Much as 18% Higher This Week
Shares of Shockwave Medical (NASDAQ: SWAV) charged sharply higher this week, soaring as much as 18%, according to data supplied by S&P Global Market Intelligence. As of market close on Thursday, the stock was still up 15.9%.
The springboard that sent the medical device specialist higher was rumors of a proposed buyout and bullish coverage from a Wall Street analyst.
At the heart of the matter
Healthcare giant Johnson & Johnson (NYSE: JNJ) has made overtures to acquire Shockwave Medical, according to a report that first appeared in The Wall Street Journal. A deal could be consummated in the coming weeks if an agreement can be reached, according to the report.
Johnson & Johnson has made no secret about plans to expand its medical device business. Shockwave Medical, with its intravascular lithotripsy (IVL) catheter for clearing calcium from the walls of arteries, would be a logical choice. It's important to note that neither company has confirmed or denied the rumors. Investors are betting that if the deal comes to fruition, it will likely come with a hefty premium, which is increasing demand for the stock.
The other driver came courtesy of analysts at CL King, who initiated coverage on the stock with a buy rating and a $368 price target. That would represent additional upside of 14% compared to the stock's closing price on Tuesday. The reasoning behind the analyst's move wasn't publicly available.
A wave of enthusiasm
There was a veritable tidal wave of positive analyst coverage and price target hikes after Shockwave Medical reported its fourth-quarter financial results last month. Revenue of $203 million grew 41% year over year, resulting in earnings per share (EPS) of $1.16.
For context, both were well ahead of analysts' consensus estimates, which were calling for revenue of $199.45 million and EPS of $0.89.
Management also issued a robust forecast for 2024, guiding for revenue of roughly $920 million, which represents 26% growth at the midpoint of its guidance, ahead of Wall Street's outlook of roughly $919 million.
Recent insurer reimbursement wins will likely help boost future results.
At 84 times earnings and 17 times sales, Shockwave Medical isn't exactly cheap, but its business is beginning to ramp up, and it appears that even Johnson & Johnson thinks it's worth the price.
Should you invest $1,000 in Shockwave Medical right now?
Before you buy stock in Shockwave Medical, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Shockwave Medical wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
*Stock Advisor returns as of March 25, 2024
Danny Vena has positions in Shockwave Medical. The Motley Fool has positions in and recommends Shockwave Medical. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
Why Shockwave Medical Stock Rallied as Much as 18% Higher This Week was originally published by The Motley Fool
