Piper Jaffray has resumed coverage of NxStage Medical (NASDAQ:NXTM) with an “overweight” rating and $18.50 price target, down from $23 previously. The stock closed at $14.96 on Wednesday.
“We have known the story since its late 2005 IPO and watched the evolution of the business from one focused on hospital and home hemodialysis (HHD) to one that can provide virtually all the supplies clinicians and patients need to treat end-stage renal failure,” writes analyst Matt O’Brien.
“However, in our view, the growth engine to the story remains home hemodialysis and we anticipate this segment of the business will deliver strong performance in the coming quarters, driven by continued patient adoption of superior therapy,” he added.
Mr. O’Brien acknowledged that competition in HHD is coming but he believes it may actually help grow the category and “we are confident that NxStage’s feature rich system will remain the dominant player going forward.”
Recognizing the struggles that NxStage has encountered in building the HHD market and its business, “we believe a majority of the heavy lifting is behind the company at this point and it is more of an execution story now,” Mr. O’Brien said.
“We are confident in this management team’s ability to execute and believe the revenue performance will remain strong in the coming years, pushing shares closer to our price target,” he added.
