Zinger Key Points
- Stifel upgrades Edwards Lifesciences to Buy, citing TAVR growth potential and FDA label expansion in 2025.
- Edwards' Critical Care sale and focus on structural heart could drive higher valuation and margin expansion post-2025.
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Edwards Lifesciences Corporation EW shares are trading higher on Thursday.
Stifel analyst Rick Wise upgraded Edwards from Hold to Buy, raising the price forecast to $90 from $75.
Wise suggests that recent conversations with six Transcatheter aortic valve replacement (TAVR) physicians and a follow-up survey of thirty doctors support the view that TAVR growth could re-accelerate in 2025.
These physicians are already seeing an increase in post-EARLY TAVR referrals, the analyst notes. Additionally, the FDA is expected to expand the asymptomatic severe aortic stenosis (AS) TAVR label in mid-2025, though some physicians are already treating patients before the label change.
According to Wise, TAVR growth slowed after COVID, causing Edwards shares to remain range-bound. However, with a more realistic 5-7% TAVR growth forecast for 2025, along with the positive new data and the expected label expansion, the analyst sees TAVR growth picking up again.
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The analyst also highlights that the sale of Edwards’ Critical Care business to Becton, Dickinson and Company in September 2024 could positively impact Edwards' valuation.
With Critical Care being the company’s lowest-growth business and a non-structural heart asset, Edwards, now focused solely on structural heart, could potentially trade at a higher-than-historical multiple.
At Edwards’ most recent annual December Analyst Day event, CFO Scott Ullem highlighted the company's increased focus on operating leverage, which Wise notes.
Following the “transition year” in 2025, Edwards expects operating margin expansion of 50-100 basis points annually starting in 2026.
The analyst sees this shift towards margin expansion and EPS growth as a positive development. As 2026 approaches, investors may pay more attention to Edwards’ margin expansion potential and EPS growth prospects, the analyst writes.
Price Action: EW shares are trading higher by 3.69% to $73.75 at last check Thursday.
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