Potential 21% Upside Seen For Shares Of Recent IPO Penumbra

BMO Capital Markets started coverage of Penumbra Inc PEN with an Outperform rating and price target of $86, implying potential upside of 21 percent.

Although it's a recent IPO, the brokerage pointed out that the company’s 2015 revenue rose 53 percent to $186 million, including $141 million (up 39.2 percent ex-fx) of Neurovascular and $45 million (up 134.9 percent ex-fx) of Peripheral Vascular product sales. Notably, the company generates 30 percent of revenue from outside the U.S.

“Given its differentiated technology, double-digit revenue growth, and path to sustainable profitability, we believe that Penumbra is positioned to deliver results,” analyst Joanne Wuensch wrote in a note.

The company’s key revenue driver is its ischemic stroke products, namely its Penumbra Aspiration system. The company’s latest ACE 68 (launched 2Q16) has improved catheter trackability and decreased procedure times.

Further, the analyst noted that the publication of the MR. CLEAN study changed the treatment paradigm for ischemic stroke, providing the clinical evidence for minimally invasive thrombectomy treatment.

Wuensch added that momentum should continue with new products, clinical data, and continued expansion of the stroke market, and expects the company to deliver double-digit revenue growth.

But, the analyst continued that investors undervaluing the rapidly growing Peripheral Vascular franchise. The franchise includes peripheral embolization and peripheral thrombectomy devices. Key products include the Ruby Coil System, Penumbra Occlusion Device or POD, and Indigo System.

“We will keep an eye on: 1) the publication of the PRISM data, which should benefit its Indigo Thrombectomy System; 2) increasing attention to the peripheral market; and 3) leverage in its Peripheral product portfolio,” Wuensch noted.

At time of writing, shares of Penumbra rose 3.64 percent to $73.45.