St. Jude Medical's stock spiked again after an analyst upgrade

St. Jude's Nanostim leadless pacemaker--Courtesy of St. Jude Medical

St. Jude Medical ($STJ) stock spiked 6% in the last week in the wake of progress with its leadless pacemaker, an analyst upgrade and the perception that its rebound story is continuing.

The Minnesota device company's stock closed at $63.59 on Feb. 10, up more than 2.5% from the previous day's trading and an increase of 6.1% over the last 5 trading days.

On Feb. 6, St. Jude disclosed that its Nanostim leadless pacemaker has been implanted in its first U.S. patient as the company starts a pivotal trial for FDA approval. But the stock spike comes from more than that. It continues an increase that has run almost unabated over the last year as St. Jude has improved its sales and returned to revenue growth, thanks to some organic growth, but also cost cuts and acquisitions, Nanostim's eponymous pacer among them.

As Marketwatch pointed out, an analyst upgrade in response to St. Jude's improved situation has also spurred new investor interest. The news service noted that Stifel Nicolaus & Co. analyst Rick Wise boosted his rating for St. Jude from buy to hold. Wise argued that St. Jude's problems with faulty ICD leads appear to be behind the company, that its development process is more stable and that St. Jude's product slate should lead to higher sales and margins over the next two to three years, Marketwatch reported.

Of course, not everyone agrees. Marketwatch pointed out that Canaccord Genuity analyst Jason Mills expressed skepticism about future growth prospects.

Also, the ICD issue could rise again and cause St. Jude further harm. Yes, St. Jude has calmed fears that its Durata ICD leads would be next on the recall list, after the 2011 recall of its Riata ICD leads following allegations of poor design, dangerous shocks and device breakdowns. But Riata will likely dog St. Jude in the months ahead as liability lawsuits work their way through the legal system, and it will be interesting to see how investors respond then.

Just last month, a U.S. District Court judge in California allowed 5 Riata failure-to-warn product liability suits against St. Jude to move forward. Previously the judge, James Selna, had only allowed negligence and manufacturing defect suits to advance.

Something else could also spook investors in the long run. The San Francisco Chronicle reported that hackers broke into the computer networks at St. Jude, Medtronic ($MDT) and Boston Scientific ($BSX) during the first half of 2013, and the violation may have continued for many months. If the report stands, then St. Jude's investors may become skeptical once again.

- read the Marketwatch piece

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