The ad one everyone’s asking about today is from Louis Navellier, it’s a pitch for his Emerging Growth newsletter (currently $995/year) — and this might be the first time we’ve seen the “Tesla of XXX Sector” marketing spiel.
Perhaps it’s a changing of the guard, we used to be told we were looking at the “Apple of” whatever… including that spiel a few weeks ago from Navellier about the “Apple of Drone Stocks” and past pitches about the “Apple of Cancer Therapy” or “Apple of China,” among others… is Tesla ready to be the next great example?
Here’s the headline of the ad:
“250% Gains in 12 Months!
“Tesla of Medical Devices to Double Again With or Without You
“Buy it now and catch the next wave of profits”
Louis Navellier’s ad copywriters over at Investorplace seem to be in a bit of a rut… either that, or they’ve just hit upon a spiel that works really, really well and they keep using it. This promise that a stock is going to double “with or without you” is very common to Navellier pitches… strangely enough, there does not seem to be any strong correlation between the promise from Navellier that it will double in short order and the actuality of the stock rising 100% from that point.
This stock has apparently posted incredible gains already, though — not many investments are up 250% in 12 months, to be sure — so… will it continue?
Picture me shrugging my shoulders, if you will, but while soothsaying may not be in the cards for us we can at least ID the stock for you. Fair enough?
Here are our clues:
“… this company has corned the medical devices market for heart pumps and related heart-saving devices.
“The result has handed investors 250% gains over the past 12 months.
“The FDA has recently approved the company’s tiny heart pumps for use in high-risk and elderly patients who continue to flood emergency rooms.
“… cardiologists have found this company’s heart pumps to be the perfect solution for heart complications during surgeries.
“… the company’s family of less invasive catheters are being used in place of balloon pumps, which had been previously become the industry standard for helping weak hearts pump blood.
“Plus the company’s next generation heart pumps look even more exciting, as they are even smaller and can be expanded when they reach the heart.”
And, in a lovely bit of news for the Thinkolator (which adores precision), we get a few specifics about the company’s financials…
“quarterly revenue growth has soared 50%… it has registered four triple-digit consecutive earnings surprises… its share price has jumped 263% over the past 12 months….”
Thinkolator sez this is: Abiomed (ABMD)
Why? Well, they do make a line of tiny heart pumps that are designed to make surgery safer, particularly for elderly and high risk patients — they are inserted directly into the heart, and are more effective than existing balloon pumps for supporting heart flow during surgical procedures. This supposedly makes it safer to do things like insert stents for patients who otherwise would be considered at prohibitively high risk during any kind of surgical procedure.
And they have had posted roughly 50% year over year revenue growth for the past two quarters — the June quarter was almost exactly 50%< the September quarter slightly less. And, since that indicates the data Navellier's copywriters are using might be a few weeks out of date, you might not be surprised to hear that the stock has not gained 263% over the last twelve months... but it was at that 263% 12-month gain as of early October. Some days it's lower, some it's higher -- this has been a very volatile stock... depending on the day you pick, it has also recently posted 300%+ annual gains. The stock has surprised on the upside these past four quarters, too -- so that's another match. The surprises have grown less dramatic as the company's sales rollout has become a bit better-understood by analysts, I guess, because they beat by only a penny per share on earnings this last quarter, the previous three quarters were much more dramatic "beats." The analyst expectations now tell a story of a stock whose earnings explosion is going to start weakening over the next year -- they think that Abiomed's earnings will post another big year next year, with 50% earnings growth to about $1.10 a share, but that after that the pace of growth will slow to something in the 15-20% range. This is actually a fairly big company, with a market cap of $3.5 billion or so, and they've been around for decades -- but it heated up over the past year and was a darling of a momentum stock going into the last quarter. Even though it looks a bit expensive now with a trailing PE of about 82, it's actually just been stabilizing after a sharp dip -- the trailing PE was about 100 just a few weeks ago. The shares dropped by about 30% in a day after they had that last earnings "beat", almost entirely because they issued forward guidance that scared everyone into thinking their big earnings surge is over and that the next quarter or two won't leapfrog the past year's results. It wasn't even bad guidance, frankly, but it implied that investors should expect slower growth over the next few quarters than the 40% goal the company had mentioned as their "earnings growth" bogey back in August. When you get a PE around 100, people look really, really closely at what the growth expectations are, and the stock fluctuates dramatically when those expectations change -- even though they're not "real" numbers. There's a bit of a story about this from IBD here — as with many Navellier stocks, it’s a favorite of other growth investors, too, and IBD’s system tracks growth and momentum in a similar way to Navellier’s. The PortfolioGrader ABMD score from Navellier’s free site is an “A” as well, even though the “earnings momentum” and “analyst revisions” parts of that score are weak.
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(As an aside: Be careful of relying on just the basic info from sites like Yahoo Finances who list this one as having a much-more-delightful trailing PE of 27 or so on $2.90 in earnings — that’s not from operating earnings, it includes a $2+ per share tax benefit, basically the accountants “releasing” their past tax deferrals as an asset they can use because they’ve reached sustainable profi