ABIOMED, a health care which we tipped as one of our favorites, was hit hard this week, especially today.
The company released earnings today, and fell some 15% during the session, only to recover to a fall of 7% at the close. Is this mini-crash justified or not? In other words, are we looking at a buying opportunity or is this a strong sell?
Let’s first analyze revenues. Below is the overview since the first fiscal quarter of last year:
$73M Q1 FY16
$76M Q2 FY16
$85M Q3 FY16
$93M Q4 FY16
$103M Q1 FY17
$103M Q2 FY17 (quarter ending September 30th of this year)
Now the company’s outlook for FY17 remains at$440M, which implies on average $117M for the next two quarters. That implies a revenue growth of around 14%, which is in line with revenue growth in previous quarters. So that’s an excellent outlook.
From a profitability perspective, the EPS dropped slightly from $0.29 in Q1 FY17 to $0.20 in the latest quarter (EPS was $0.17 in the quarter one year before).
The company is still debt free. The cash position is $236M, up 5% from the previous quarter. There was a slight increase in shares outstanding, slight dilution in other words.
We don’t see any valid reason for concern based on the above data.
Moreover, from a chart perspective, we notice that the stock retraced from a steep rise, only to come to closely to its long term moving average. The stock has seen volatility in the past, so, again, no real reason for concern.
We would say that the $90 level is the key level to watch. We do not expect it will be breached, if so, it would be a very bearish sign. We believe, though, that the decline will not continue, and that the uptrend will continue in the coming weeks. We are not selling our positions at this point, and, depending on price action in the coming days and weeks, would consider an additional position, but only if the decline stops at this level.