BofA Positive On Medtech Stock ShockWave In The Long Run

Smid-cap MedTech company ShockWave Medical Inc SWAV has seen its shares appreciate over 120% year-to-date.

The ShockWave Analyst: BofA Securities analyst Bob Hopkins downgraded ShockWave from Buy to Neutral, citing valuation. Given the recent appreciation in the peer group, the analyst increased the price target to $105.

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The ShockWave Medical Thesis: BofA is very bullish on ShockWave shares and the downgrade is merely a valuation call, Hopkins said in a Tuesday note.

Much of the company's long-term prospects appear to be discounted in the valuation of the shares, the analyst said.

Given its market cap, the company needs to generate over $800 million in revenue in 2025 and would need to trade at 10 times its 2025 sales to drive a 20% annual return, he said. 

To reach that level of revenue in five years, the company should grow its revenues at a compounded annual growth rate of 60% from current levels for those five years and capture about 20% of its total addressable market by 2025, Hopkins said.

In comparison, the company's stroke market reached about 15%-20% of its total addressable market in five years after the presentation of pivotal data, the analyst said. 

Although ShockWave could achieve those levels, the hurdle is higher for it than other medtech companies in BofA's coverage universe, he said. 

"We are positive on SWAV's long term prospects but are Neutral rated based on valuation and competition in the space." 

SWAV Price Action: At last check, ShockWave shares were down 4.73% at $93.20. 

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