Ahhh, back to my old home base of small-cap med-techs. Today we're looking at AtriCure
As far as it matters, AtriCure beat the most important estimate for a company in its stage of development. Revenue grew 49% from last year (about 19% sequentially), surpassing the high end of analysts' range. Although the net loss was larger than expected ($4.3 million vs. $2.5 million), investors rarely pay much attention to earnings-per-share performance at this stage of the game.
I imagine that investors may be worried by the company's guidance for the next quarter. It suggests that revenue will be no better than flat for the quarter (and quite possibly down), and well below prior analyst estimates. Though management's explanation may be accurate (customer concerns tied to some inflammatory newspaper articles), investors get very twitchy about sequential weakness when revenue growth is the name of the game.
AtriCure has an attractive market to address; some believe that the company's minimally invasive approach to treating atrial fibrillation could be worth billions of dollars.
Of course, part of the question is how those billions will be split up. AtriCure is taking on some of the giants of the industry, including Medtronic
Over the long haul, AtriCure needs to establish that its approach is demonstrably better, and fight the perception that one tissue-burning system is as good as any other. What's more, the company's products aren't actually FDA-approved for their main intended use (cardiac abalation). That's not especially uncommon in this market; surgeons routinely engage in off-label use of devices, and reimbursement is usually no problem. But it does restrict the company's marketing efforts, and it is a risk factor.
Investing in small medical device companies is not for the faint of heart -- check out charts of stocks like Kyphon
Take further Foolishness to heart:
- Phase 2 for Intuitive Surgical
- Guidance Puts ICU Medical in the Trauma Ward
- Cyberonics' Ride Not Over Yet
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).