How High Can Boston Scientific Stock Go?

The U.S. population is older now than it has ever been. Between 1980 and 2022, the median age of the population in the country increased from 30.0 to 38.9. This has also resulted in an increase in the number of seniors. The number of Americans aged 65 and older is projected to increase by 47% versus 2022 to 82 million by 2050.

The increase in the geriatric population is also leading to a heightened need for healthcare services. This, in turn, is creating new opportunities as spending and support increases. One healthcare field that is seeing tailwinds from such trends is MedTech.

The global MedTech market is expected to be valued at $598.90 billion this year, according to Statista. It is projected to rise at an annual growth rate of 5.3% to reach a market volume of $775.80 billion.

Although the market is highly fragmented, there are some notable names that have emerged as MedTech favorites. Boston Scientific Corporation (NYSE:BSX) is one of those names. The company’s stock has gained 61% over the past year, far outpacing the overall market’s growth trajectory. But is the top near and, if not, high can it go?

Boston Scientific Is A Proven Deal Maker

Boston Scientific is essentially constrained to two avenues for growth. The first is organic via product creation and the second is inorganic via acquisition. It’s clear that management is not shy about the latter.

According to Tracxn, the company has made 51 acquisitions. 2018 was the most active year for the company in this regard, with 10 deals, and has averaged two acquisitions per year over the past three years.

Most of these acquisitions have been inside the United States, with a majority of them aimed at its flag-bearing cardiovascular portfolio.

This year alone, Boston Scientific has made two high-profile deals. First, the company announced that it would be acquiring Axonics, Inc. (NASDAQ:AXNX). Axonics deals with the development and commercialization of differentiated devices to treat urinary and bowel dysfunction. This is a blockbuster deal with an equity value of approximately $3.7 billion.

This is a lucrative market area and is estimated that in the U.S., nearly 30 million adults ages 40 and older have bothersome symptoms of overactive bladder, while 19 million adults have fecal incontinence. These issues can affect many individuals’ daily lives.

Axonics’ systems provide sacral neuromodulation therapy, which is a minimally invasive procedure that works by delivering mild electrical pulses to the sacral nerve to restore communication between the brain and the bladder.

While the prospects are huge, the deal is facing some regulatory scrutiny. The Federal Trade Commission is taking a closer look at the deal, which could push back its closing date.

Moreover, Axonics is in a spat over patents with MedTech market leader Medtronic plc (NYSE:MDT), which might be inherited by Boston Scientific if and when the deal carries through.

Secondly, management announced a deal to purchase Silk Road Medical, Inc. (NASDAQ:SILK), which is a medical device firm that has developed the groundbreaking transcarotid artery revascularization (TCAR) therapy.

The TCAR procedure involves accessing the carotid artery through a small incision in the neck and temporarily reversing blood flow away from the brain to prevent plaque from dislodging and causing a stroke.

The deal will expectedly close in the second half of this year. While Silk Road Medical estimates a net revenue of approximately $194-198 million in 2024, which reflects a 10-12% growth over the prior year, the impact on Boston Scientific’s earnings per share is expected to be immaterial for the current and next year.

Apart from the Silk Road acquisition, the company also had some notable approvals, which should be highly accretive to its portfolio. Its FARAPULSE Pulsed Field Ablation (PFA) System received approval in China. AGENT Drug-Coated Balloon also received this approval after its U.S. launch.

Stunning Top Line Growth For Years

As of the second quarter of this year, net sales increased by 14.5% from the prior year’s period to $4.12 billion.

The growth rate was quite a lot better than the 10.5%-12.5% year-over-year rate the company had forecasted. The company’s leading cardiovascular segment is leading the charge in terms of growth, growing by 17.8% on a reported basis.

The United States remains Boston Scientific’s biggest market by a significant margin, but it is also seeing meaningful growth in emerging markets. And top line growth has translated into a highly profitable business with $718 million in EBIT in last quarter alone.

As of now, Boston Scientific is expecting a 13.5%-14.5% growth in its net sales for the full fiscal year and an organic growth in the range of 13-14%.

Interestingly, looking back over time, only two of the past 20 quarters has BSX failed to report year-over-year quarterly growth.

Putting it all into the mix, what does it mean for the stock?

How High Can BSX Stock Go?

If the consensus among 31 analysts is correct, BSX stock doesn’t have a whole lot more upside to $97 per share.

Caution is definitely warranted however because a discounted cash flow forecast analysis pegs fair value closer to $71 per share.

BSX stock is also trading at a fairly high multiple of 74x to near-term earnings growth, though net income growth is still pegged at 29.% annually over the next 5 years.

With $15.9 billion in revenues and $1.7 billion in net income alongside $2.5 billion in cash on the balance sheet, it’s clear that Boston Scientific has a lot of runway left on its growth trajectory.

For conservative-minded investors, a pullback technically is probably warranted before getting aggressive though long-term investors can feel confident that both the income statement and balance sheet are solid.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.