Please ensure Javascript is enabled for purposes of website accessibility

Shockwave Medical Has Captured Just a Fraction of Its $6 Billion Market Potential

By Brian Orelli, PhD and Keith Speights - Updated Mar 8, 2021 at 12:21PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The medical-device maker needs to keep its foot on the revenue gas.

Shockwave Medical (SWAV -2.95%) posted substantial increases in revenue in the fourth quarter. But it's still far from reaching its $6 billion annual addressable market. In this video from Motley Fool Live, recorded on Feb. 22, Fool.com Contributors Brian Orelli and Keith Speights discuss Shockwave's most recent quarter and the opportunities ahead for the medical-device maker.

Brian Orelli: Then moving on to Shockwave Medical, which develops treatments to break down calcium deposits in arteries. They reported fourth-quarter earnings last week. Revenue was up 59% to $22.7 million, gross margins increased to 72% from 61% in the year-ago quarter. Gross margins aren't something I really think about a lot on the drug side, but it's a big factor for devices, and that big jump from 61% to 72% is definitely going to help them as they move toward profitability. Received FDA [Food and Drug Administration] approval for severely calcified coronary artery disease during the quarter and are not issuing guidance, which seems reasonable given the unknown issues with the pandemic, and their main customers are going to be hospitals. And they may not have a firm grip on their capital outlays for the year. Shares dropped on Thursday after the quarter, but bounced back on Friday. It seems like the opportunity in severely calcified artery disease is a big opportunity but a bit of unknown. Thoughts on Shockwave Medical?

Keith Speights: Yeah, for our viewers who aren't very familiar with Shockwave, what they've done is they use intravascular lithotripsy, or IVL, to crack calcium that's blocking arteries. Anyone who has had a kidney stone, as I have, knows what lithotripsy is. It uses sound wave to break up these calcium deposits. It has been used for decades to help break up larger kidney stones, and it's a very safe process.

What Shockwave has done is they've taken this technology that's been around for a long time and they've applied it to use within arteries to break up those calcium deposits. They estimate that their addressable market is at least $6 billion annually. And this approach is, I think, significantly less risky than the current standards of care for unblocking arteries, so there are lots of safety advantages to it. It's also less expensive, which is good.

I think Shockwave's keys [to] success going forward, though is, they need to continue establishing the clinical proof of the advantages for IVL. That's important. They need to continue winning regulatory approvals for additional indications to be able to go after that full $6 billion-plus addressable market, and then securing reimbursements with payers, which they've done a good job so far, but they will need to continue to do that. Their market cap is around $4.5 billion. I think the stock has plenty of room to run as they capture more of that market.

Orelli: Great. It seems like it's just a fairly small company. I think that's the key to investing in it right now as we're looking for substantial growth of the small market cap, which should help investors in the long run.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

ShockWave Medical Stock Quote
ShockWave Medical
SWAV
$160.69 (-2.95%) $-4.88

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
334%
 
S&P 500 Returns
117%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.