By Michael Elkins
Raymond James downgraded Edwards Lifesciences Corp (NYSE:EW) to a Market Perform rating (From Outperform) as confidence in the company’s growth profile begins to fade. EW’s revenue growth has separated it from most of its peers and has long supported a premium valuation. However, analysts are concerned that recent TAVR trends (in the 7-8% range) may continue, which limits upside to estimates, and the multiple.
They wrote in a note, “With slowing TAVR growth, and increasing competition, we believe the narrative on the stock becomes more defensive, until U.S. TAVR growth sustainably accelerates, or the rich pipeline gets closer to commercialization. While much of this thinking may already be reflected in the stock (and is a risk to our call), EW still trades at 33/29x 2023/24E non-GAAP EPS, which may deter new investment and makes it tougher to stay constructive without confidence that there is much upside to consensus estimates.”
Raymond James’ estimates are slightly below consensus for 2023, and while the revenue guide implies a modest acceleration (off of easier comps), analysts believe it is achievable. On EPS, they believe there is an opex cushion that should allow EW to product a modest upside, but investor focus will likely be on revenue.
Shares of EW are down 3.4% in early trading on Monday.