Markets

Why Abiomed Stock Plunged 31% in August

What happened

Abiomed (NASDAQ: ABMD) stock plummeted 30.7% in August, according to data from S&P Global Market Intelligence.

Shares of the Massachusetts-based maker of minimally invasive heart pumps are down 41.7% in 2019 through Sept. 6. The healthcare stock remains a big winner, however, over periods longer than three years.

For context, the S&P 500, including dividends, fell 1.6% last month and is up 20.5% so far this year. 

Woman in a lab coat, with a stethoscope around her neck, holding a red heart-shaped object between her hands.

Image source: Getty Images.

So what

We can attribute Abiomed stock's poor August performance to the company's Aug. 1 release of fiscal first-quarter 2020 results that fell short of Wall Street's revenue estimate along with management lowering its full-year guidance. The latter was probably the bigger factor since the market is a forward-looking machine. Shares plunged 26.5% following the release. 

In fiscal Q1, Abiomed's revenue grew 15% year over year to $207.7 million, missing the $210.7 million analysts had expected. We can blame the miss on U.S. Impella sales growing just 11% year over year to $151.7 million, which includes a 20% sequential drop in sales of the Impella RP. This device was the subject of a confusing February letter sent by the Food and Drug Administration to healthcare providers, as my colleague Brian Feroldi wrote at the time. In May, the FDA issued an update saying that the Impella RP was safe and effective, but it appears that not all providers received that information and/or there is still some confusion in the market about the topic. 

Net income based on generally accepted accounting principles (GAAP) edged down 1% to $88.9 million, or $1.93 per share. This included a $0.65-per-share unrealized gain from the company's investment in ShockWave Medical (NASDAQ: SWAV) and a $0.28-per-share tax benefit related to employee share-based compensation. Excluding these items, adjusted earnings per share (EPS) came in at $1, up 28% from the year-ago period, and higher than the $0.97 consensus estimate.

CEO Michael Minogue said in the earnings release that the company is addressing the issues negatively affecting growth: "In Q1, we implemented new training programs, organizational changes in distribution, and launched external initiatives that will require time to drive more growth in the future. We are confident in our ultimate global adoption because we know that our innovation improves clinical outcomes and patient quality of life."

Now what

Abiomed's management lowered its outlook for full-year fiscal 2020 revenue and operating margin. Revenue is now expected to come in between $885 million and $925 million, which represents growth of 15% to 20% year over year. The prior revenue guidance was $900 million to $945 million. GAAP operating margin is now forecast to be in the range of 28% to 30%, down slightly from the previous guidance of 29% to 31%.

10 stocks we like better than Abiomed
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Abiomed wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

 

*Stock Advisor returns as of June 1, 2019

 

Beth McKenna has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Abiomed. The Motley Fool recommends ShockWave Medical. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

ABMD SWAV

Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More