Shares of ShockWave Medical (NASDAQ:SWAV) jumped 7.3% on Friday after surging as much as 11.8% earlier in the day despite no real news from the medical device maker. What lit a fire beneath the stock? One possible factor is that investors could be flocking to the stocks of other companies that have recently conducted initial public offerings (IPOs) after huge jumps for Beyond Meat (NASDAQ:BYND) and Zoom Video Communications (NASDAQ:ZM).
Beyond Meat and Zoom both announced impressive quarterly updates on Friday morning. All three of these stocks are IPOs that have more than doubled so far in 2019. It seems that investors' IPO fever intensified with the great financial results for Beyond Meat and Zoom, spurring more interest in ShockWave as well.
There's something called the "sympathy play" in investing. When the stock of a company in an industry moves up or down significantly, investors often buy or sell other stocks in that industry in the belief that the underlying factors behind the momentum for the one stock will also impact others.
Of course, the plant-based meat and video-conferencing businesses of Beyond Meat and Zoom, respectively, are about as different from ShockWave's cardiovascular medical device business as you can get. Despite this, I suspect we're seeing a sympathy play of sorts because some investors are mentally connecting all three stocks because of their common denominators of sizzling growth and IPOs earlier this year.
Investors are better off evaluating individual stocks on their own merits. There's a lot to like about ShockWave Medical regardless of what's happening with other companies. Its revenue skyrocketed 450% year over year in the first quarter. It's expecting full-year revenue growth of up to 194%. And the company's long-term prospects appear to be really good.
Investors have several things to look forward to from ShockWave Medical. The company is already conducting a limited launch of the 3.5 millimeter and 4 millimeter versions of intravascular lithotripsy (IVL) devices for small blood vessels. ShockWave expects to have four sizes of the device, including the 2.5 millimenter and 3 millimeter versions, on the market in the fourth quarter of 2019.
The company also should present data from its CAD II post-market study later this year or in early 2020. This study was required following the European approval of ShockWave's coronary IVL catheter used in heavily calcified coronary lesions.
Investors' IPO fever could cool down. But if ShockWave Medical can achieve its potential, this stock could stay hot for a long time.