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Why ShockWave Medical, Novocure, and Guardant Health Shares Tanked Today

By Brian Feroldi - Mar 16, 2020 at 5:17PM

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It was another brutal start to the trading week.

What happened

Shares of ShockWave Medical (SWAV -1.65%), Novocure (NVCR -4.01%), and Guardant Health (GH -4.04%) all plunged on Monday. These healthcare stocks ended the trading session down 15%, 12%, and 17%, respectively. 

So what

The Federal Open Market Committee, which is the policy-making part of the Federal Reserve, announced a surprise monetary stimulus program over the weekend. The benchmark interest rate was reduced by 100 basis points to between 0% and 0.25%. 

The Fed also decided to boost its Treasury securities holdings by $500 billion and its agency mortgage-backed securities by $200 billion.

The Fed decided to take this action in an effort to help the U.S. economy more easily absorb the disruption caused by the spread of COVID-19.

Man in suit holding a smal bear statue

Image source: Getty Images.

Fed Chairman Jerome Powell said: "We will maintain the rate at this level until we're confident that the economy has weathered recent events and is on track to achieve our maximum employment and price stability goals."

And yet, despite the bold move by the Fed, the major U.S. stock indexes still plunged on Monday. The S&P 500, Dow Jones Industrial, and Nasdaq all fell by more than 12%. 

Now what

Plenty of stocks have been walloped over the last few weeks, but highly valued growth stocks like ShockWave Medical, Novocure, and Guardant Health have been hit even harder. These stocks are currently trading 60%, 38%, and 45% down, respectively, from their all-time highs.

While the pessimism makes sense, investors should ask themselves whether or not the spread of the coronavirus will impair these companies' long-term ability to grow.

ShockWave makes an innovative device that cracks apart calcified artery plaque, and it has the data to show that its system is both safe and effective. That makes it likely that forward-thinking healthcare providers will continue to give it a try. Management guided for revenue to grow about 75% in 2020 just a few weeks ago, so it doesn't appear to be concerned about the near-term impact of the coronavirus (at least not yet).

Novocure is a medical device company that has developed a fourth modality of cancer treatment. Sales of its Optune device have grown extremely rapidly over the last few years, and the company recently reached profitability. Numerous clinical trials are underway that could significantly expand its addressable market, too.

Guardant Health is a leading provider of liquid biopsies, and demand for its products has been nothing short of explosive. Management recently called for revenue growth of 31% in 2020, and it has also been investing aggressively to expand into early detection of cancer and recurrence monitoring. If those efforts pan out, then this company could remain in high-growth mode for years to come.

It's possible that these companies' growth rates might slow in the coming months since all healthcare systems are likely to be hyper-focused on dealing with the COVID-19 fallout. But I don't think that any of these industry disruptors will be permanently impaired. 

The volatility is likely to continue for the time being, but all of these high-quality healthcare companies appear to have bright futures. If you can stomach the volatility, the smart move is likely to be to just stay the course.

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Stocks Mentioned

NovoCure Stock Quote
$69.50 (-4.01%) $-2.90
Guardant Health, Inc. Stock Quote
Guardant Health, Inc.
$40.34 (-4.04%) $-1.70
ShockWave Medical Stock Quote
ShockWave Medical
$191.17 (-1.65%) $-3.20

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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