JPMorgan: Buy The Boston Scientific Dip

Boston Scientific Corporation BSX announced Tuesday after the close a delay to earlier timelines that were established for commercialization of the LOTUS Edge Aortic Valve System in Europe and the U.S.

The company had previously looked at reintroducing the product in Europe in the first quarter of 2018 and filing a final Pre-Market Approval, or PMA, with the FDA by January.

Although reacting to the development, the stock moved to the downside in after-hours trading Tuesday; it is advancing in Wednesday's session.

The Analyst

JPMorgan analyst Michael Weinstein maintained its Overweight rating and $31 price target for shares of Boston Scientific.

The Thesis

Following discussions with the management of Boston Scientific, JPMorgan summarized key takeaways on the aortic value system delay and the implications for the company, as well as its competitors in the TAVR space, in a Tuesday note.

The delay is internally driven, with no issues present with the European notified body or with the FDA, Weinstein said in the note. (See Weinstein's track record here.) 

The issue is with manufacturing, as the final batch of Lotus Edges rolled out Monday afternoon did not match specs, the analyst said. 

The analyst said he does not expect Boston Scientific to provide a timeline for a resolution on a Wednesday morning call, but expects regular updates from the company.

Notwithstanding the adverse development, JPMorgan continues to proejct that Boston Scientific can grow top-line by 6 percent organically and by 7-8 percent in 2019-20202, with a 12 percent cash earnings per share CAGR. This should lead to double-digit earnings per share growth in 2018-2020, according to JPMorgan. 

The firm said it would be buyers of Boston Scientific on any ensuing weakness.

"Investor confidence in Lotus will take some time to improve, but even if one takes Lotus out of the model, one can still make the case for 6-7 percent revenue growth and double-digit EPS growth through the end of the decade, which still puts BSX at the high end of its peers," Weinstein said.

The Price Action

Boston Scientific shares are up over 23 percent in the year-to-period.

At the time of writing, the shares were adding 0.49 percent to $26.52.

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Photo courtesy of Boston Scientific.