Though ShockWave Medical (NASDAQ:SWAV) shared upbeat news with investors Tuesday, shares of the medical device company fell as much as 13% in afternoon trading. The stock was down about 10% as of 3:20 p.m. EDT.
Two news items appear to be impacting the share price.
First, Shockwave, which focuses on treating calcified plaque, announced it had received a Breakthrough Device Designation from the Food and Drug Administration for its C2 Coronary IVL Catheter. The device uses sonic waves to fracture calcium deposits in the heart with the goal of improving blood flow. The C2 is already available for sale in Europe, and Shockwave is currently enrolling patients in a pivotal study to hopefully win U.S. regulatory approval. Gaining that Breakthrough Device Designation from the FDA certainly is a good sign that it eventually will be approved.
Unfortunately, that positive news is being overshadowed by the second news item.
Cliffside Research issued a short report on ShockWave Medical Tuesday that called the stock a strong sell, and set a short-term price target of $23. That was well below Friday's closing price of $41.85. Cliffside asserts that a seasonably weak third-quarter will combine with a lockup expiration to drive the company's share price lower.
The short report took center stage today, which explains why shares are falling by double-digit percentages.
It's usually worthwhile for investors to read through short sellers' reports to see if they contain any thesis-changing news. In this case, the lockup expiration and a seasonably weak third-quarter may or may not cause the share price to decline in the short term, but it's hard to imagine how either of them could have any impact on the long-term potential of the business.
It isn't uncommon for shares of fast-growing companies like Shockwave to be highly volatile, nor to occasionally find themselves on the receiving end of a short report. The good news is that the share price will eventually take care of itself if this company can continue to deliver triple-digit percentage revenue growth and deliver on its long-term potential.