Is it the right time to invest in Abiomed (ABMD) stock?

Medical devices like ventilators and personal protective equipment are in high demand during the pandemic and their shortage often adds to the burden of the stressed healthcare system. But companies like Abiomed, Inc. (NASDAQ: ABMD), which mostly provides medical devices used in elective procedures, experienced a slowdown in the early phase of the virus outbreak as hospitals and clinics put on hold non-urgent procedures.

Though healthcare institutions continue to be focused on providing treatment to those affected by coronavirus, they have resumed non-COVID care activities. Naturally, it has resulted in care centers witnessing a rush of patients who have been waiting to have their elective procedures done.

Moderate Buy

Shares of the Massachusetts-based company, which is specialized in mechanical circulatory support devices, have regained most of the lost momentum but stayed below the record highs of September 2018. Currently, Analysts’ consensus rating on the stock is moderate buy, with a target price that represents a 22% upside from Tuesday’s closing.

The company posted stronger-than-expected earnings and revenues consistently in fiscal 2021, after recovering from a brief slowdown in the early months of the pandemic. Latest data show that the uptrend was maintained in the first quarter of the current fiscal year.

Strong Start to FY22

In the first quarter, revenues moved up 53% annually to $253 million, which is above the consensus forecast. Adjusted earnings nearly doubled to $1.10 per share during the three-month period and topped Wall Street’s expectations. The management expects full-year revenues to grow 23% to around $1 billion, which was revised up from the initial outlook.

From Abiomed’s first-quarter 2022 earnings conference call:

“Our breakthrough platform now includes the Impella portfolio, ECMO with Breethe, ECPella, and recently acquired preCARDIA. preCARDIA was designated by the FDA as a breakthrough technology and will complement our existing product portfolio, increased options for patients with acutely decompensated heart failure called ADHF, and expand our relationship with heart failure specialists managing the ICU.”

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The positive outcome mainly reflects strong global sales of the company’s flagship ventricular-assist-device Impella. Recently, the Impella RP with SmartAssist, the first single-access temporary percutaneous ventricular support device with sensor technology, received pre-market approval from the FDA. Earlier this year, Abiomed acquired Breethe, a provider of ECMO machines used for providing prolonged cardiac and respiratory support.

COVID Woes

The resurgence of COVID cases and the lingering threat of a fresh outbreak could weigh on the future prospects of Abiomed. Meanwhile, medical device companies, in general, were hit by a stock selloff this week after Texas Governor Greg Abbott asked hospitals to consider postponing certain elective medical procedures.

The fact that Abiomed managed to navigate through the virus crisis — unlike some of its peers – underscores the strength of the company’s fundamentals and financial health, supported by the stable demand for its heart pumps. Also, there are clear signs that the COVID crisis is easing, which would set the stage for procedure volumes to rebound.

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At $345.65, Abiomed’s stock closed the last trading session well above its 52-week average. However, it changed course on Tuesday and traded lower throughout the session. The shares have gained 9% in the past twelve months.