Wall Street is underestimating the opportunity for a cardiovascular medical device company’s core product to penetrate the market, according to Morgan Stanley. Analyst Patrick Wood upgraded shares of Shockwave Medical to overweight from in-line, saying that the Street is misjudging the potential catalysts that could improve the sales outlook for its coronary IVL catheter used before stent implantation, and that consensus expectations look “too low.” “We expect [the Centers for Medicare & Medicaid Services] to propose better outpatient reimbursement in the coming week (up c. $4,300 for inpatient and c. $2,400 for outpatient), driving a potential acceleration in penetration of SWAV’s coronary IVL catheter and upside to Street expectations,” he wrote, adding that sell-side analysts are getting it wrong in anticipating a “sequential slowdown.” Given this setup, Wood lifted his price target to $335 a share, reflecting 28% upside from Friday’s close. Shares have rallied more than 27% since the start of 2023. SWAV YTD mountain Share performance in 2023 Potential catalysts for Shockwave shares include an investor day, a favorable environment for medical technology and an extended timeline before it faces new competition, Wood said. He added that Shockwave’s valuation looks attractive relative to peers. “We think recent coronary reimbursement improvements from CMS mean the market is underestimating the penetration opportunity over the coming 2-3 years,” Wood wrote. — CNBC’s Michael Bloom contributed reporting
