Needham Downgrades Penumbra to Hold Following Acquisition Deal
Written by Emily J. Thompson, Senior Investment Analyst
Needham downgraded Penumbra (PEN) to Hold from Buy following the announcement of a deal to be acquired by Boston Scientific (BSX). The firm notes the "significant" premium that Boston Scientific is paying and also contends that competing bids are unlikely given potential antitrust issues for other large-cap med tech companies, the analyst tells investors in a research note.
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Analyst Views on BSX
Wall Street analysts forecast BSX stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for BSX is 125.74 USD with a low forecast of 112.00 USD and a high forecast of 140.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
20 Analyst Rating
20 Buy
0 Hold
0 Sell
Strong Buy
Current: 93.790
Low
112.00
Averages
125.74
High
140.00
Current: 93.790
Low
112.00
Averages
125.74
High
140.00
About BSX
Boston Scientific Corporation is a global developer, manufacturer and marketer of medical devices that are used in a range of interventional medical specialties. The Company's MedSurg segment includes Endoscopy, Urology, and Neuromodulation. Its Endoscopy business develops and manufactures devices to diagnose and treat a range of gastrointestinal conditions with less-invasive technologies. Its Urology business develops and manufactures devices to treat various urological conditions for both male and female anatomies, including kidney stones, benign prostatic hyperplasia, prostate cancer, erectile dysfunction, and incontinence. Its Neuromodulation business develops and manufactures devices to treat various neurological movement disorders and manage chronic pain. Its Cardiovascular segment includes Cardiology and Peripheral Interventions. The Cardiology includes interventional cardiology therapies, watchman, cardiac rhythm management, and electrophysiology.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Boston Scientific Faces Setback; Acquisition of Penumbra Expected to Boost Stock Performance.
- Acquisition Focus: Boston Scientific is heavily focused on acquisitions as part of its growth strategy.
- Stock Impact: The latest acquisition has negatively affected the company's stock in the short term, but it is expected to yield positive results in the future.
- Investor Patience: Investors are encouraged to remain patient as the long-term benefits of the acquisition are anticipated to materialize.
- Future Outlook: Despite current stock challenges, the outlook for Boston Scientific remains optimistic due to its strategic acquisitions.
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Boston Scientific's $14.5B Penumbra Acquisition Faces Valuation Concerns
- Acquisition Scale: Boston Scientific's $14.5 billion acquisition of Penumbra raises concerns among analysts regarding the high purchase multiple of $374 per share, which may hinder the company's ability to achieve strong returns on invested capital despite creating a powerhouse in the thrombectomy and neurovascular markets.
- Market Re-entry: This acquisition marks Boston Scientific's re-entry into the neurovascular market, with CEO Mike Mahoney emphasizing the need for a scaled platform and robust pipeline to enhance competitiveness in this attractive segment after divesting its neurovascular business over a decade ago.
- Sales Expectations: Penumbra is projected to contribute approximately $1.4 billion in sales by 2025, and the integration is expected to enhance Boston Scientific's revenue and margins over the long term, although the current valuation concerns remain a focal point.
- Investment Outlook: While Boston Scientific is viewed as a promising mid-cap growth stock, Oppenheimer suggests that certain AI stocks may offer greater upside potential and carry less downside risk, urging investors to carefully evaluate their options.
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