Why ABIOMED Shares Are Pumped Up

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of ABIOMED (NASDAQ: ABMD  ) , a maker of medical devices for the cardiovascular system, jumped as much as 10% after the company reported better-than-expected preliminary revenue for the fourth-quarter.

So what: In its preliminary fourth-quarter report, ABIOMED is forecasting revenue of $43.7 million, which is noticeably higher than the $41.5 million Wall Street had been projecting for the quarter, and up 17% over the year-ago period. Driving its results was a 22% increase in Impella heart pump sales, which comprise 90% of ABIOMED's revenue stream. The release also notes that the Impella 2.5 was purchased by an additional 30 hospitals during the quarter, and 55 hospitals purchased its new Impella CP device.

Now what: With the Food and Drug Administration off ABIOMED's back, the long-term visibility of its Impella line of heart products is a lot easier to understand. ABIOMED is nowhere near inexpensive at 38 times forward earnings; however, if it can continue to pace its growth around 20% -- and that would entail the introduction of new Impella products every few years -- then I could definitely see some modest upside to its share price, even here.

Craving more input? Start by adding ABIOMED to your free and personalized watchlist so you can keep up on the latest news with the company.

While you can certainly make huge gains in device makers like ABIOMED, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

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Related Tickers

9/30/2016 4:00 PM
ABMD $128.58 Up +0.16 +0.12%
Abiomed CAPS Rating: ****