Boston Scientific stock down as Needham cuts to Hold on growth concerns

Investing.com -- Shares in Boston Scientific (NYSE:BSX ) fell more than 1% in premarket trading Friday after analysts at Needham & Co. downgraded the stock to Hold from Buy, citing several concerns about the company's future growth and market competition.

The investment firm pointed to an anticipated slowdown in Boston Scientific's Electrophysiology (EP) business by 2025, which is expected to impact the company's overall revenue growth. This slowdown is attributed to the company lapping the FARAPULSE launch in the first quarter of 2025 and facing challenging comparisons in its EP business during that year.

Needham analysts also highlighted increasing competition in the Pulsed Field Ablation (PFA) market, with Johnson & Johnson (NYSE:JNJ ) launching VARIPULSE and Medtronic (NYSE:MDT ) expected to launch Affera by early to mid-2025.

Citing their expert call with Dr. Sunil Kapur, analysts note there is a likelihood that Boston Scientific will lose a significant share of the PFA market.

“While this is just one physician's view, we think it is inevitable that BSX loses meaningful PFA share,” they said.

The consensus currently suggests a 36% growth in EP for 2025, but Needham believes this may be overly optimistic and models a 30% growth instead.

Furthermore, Needham expressed concerns regarding the ACURATE trial results for Boston Scientific's ACURATE neo2 transcatheter aortic valve replacement (TAVR). The trial results, scheduled to be presented on October 30, 2024, at the Transcatheter Cardiovascular Therapeutics (TCT) Meeting in Washington, DC, could influence the stock by 5-10% in either direction.

There is less than a 50% probability of success for the ACURATE trial, which, if it does not meet its endpoints, could prevent FDA approval and potentially affect international sales of ACURATE neo2.

In terms of valuation, Boston Scientific shares have surpassed Needham's price target and are considered fairly valued. The shares are trading at 32.1x Needham's estimated 2025 earnings per share (EPS), which is a significant premium compared to its large-cap peers and its large-cap cardiovascular peers.

Also, from a historical perspective, the company's shares are trading at a next-twelve-months (NTM) price-to-earnings (P/E) ratio of 32.6 times, which is notably higher than its ten-year average NTM P/E ratio.

Source: Investing.com