Friday, December 21, 2018

Penumbra Should Shine Brighter

I loved just about everything about Penumbra (PEN) except the price/upside when I last wrote about this fast-growing neurovascular med-tech company. Since then, the company has continued to sail past sell-side expectations, but the market has gotten more risk-averse and worries have cropped up about how Penumbra and its growth rate will fare in 2019 against more direct competition from Medtronic (MDT), Stryker (SYK), and other neurovascular players. With that, the shares are down about 6% and I don’t feel like I’ve missed out on all that much (particularly when Penumbra has actually slightly underperformed Medtronic and Stryker in that “risk-off” trade).

I still like this company quite a bit, though, and the growth potential in peripheral vascular may be considerably greater than expected even a year ago. Although competition is a threat, I think it is highly likely that either Medtronic or Stryker buys Penumbra at some point (with a lower, but certainly non-zero, probability of a bid from a company like Johnson & Johnson (JNJ) ), and I’m not too troubled by the robust valuation. Further risk-off behavior in the market, and a general de-rating of growth med-tech, is certainly a risk factor going into 2019, but that’s a risk I’m more and more inclined to take on with Penumbra.

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Penumbra Should Shine Brighter

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