Shares of ShockWave Medical (SWAV -2.61%) were sinking 14.5% as of 11:43 a.m. EDT on Wednesday. The drop came after Oppenheimer analyst Suraj Kalia downgraded the medical device stock to an underperform rating with a one-year price target 31% lower than ShockWave's closing price on Tuesday.
Wall Street analysts' downgrades (and upgrades) should be taken with a grain of salt. There's a built-in incentive for analysts to focus on the short term rather than the long term.
It's certainly possible that ShockWave's short-term prospects could be dented somewhat in the wake of the coronavirus pandemic. Some less-crucial procedures could be pushed back. But any such delays will only be temporary. No physician or patient will want to postpone procedures using ShockWave's intravascular lithotripsy (IVL) for too long.
And ShockWave's long-term prospects still appear to be very good. IVL is less risky than using balloons or performing surgery to clear plaque buildup in arteries. CEO Doug Godshall even mentioned in the company's Q4 conference call in February that "IVL has surprised us by being used effectively in ways we had not thought possible, and ways that make a huge difference in treating patients."
ShockWave's outlook provided in February projected full-year 2020 revenue between $74 million and $77 million. The midpoint of that range represents year-over-year growth of more than 75%. Investors will want to monitor if the company backtracks any on that guidance in light of the pandemic.
Even healthcare stocks like ShockWave that should be largely insulated from the effects of the pandemic will probably remain very volatile for at least another couple of months. But this could present tremendous buying opportunities for investors who have a long-term perspective and shrug off negative takes from analysts who don't.