Shares of HeartWare International Inc (NASDAQ:HTWR) jumped over 90% today, following the news that the heart-failure device maker agreed to be bought by Medtronic PLC (NYSE:MDT) for about $1.1 billion. MDT will acquire all outstanding shares of HTWR common stock for $58.00 per share in an all cash transaction, which represents a 93% premium to HTWR’s closing price on Friday.
In reaction, Canaccord analyst Jason Mills reiterated a Buy rating on shares of HeartWare, while raising the price target to $66 (from $45), which represents a potential upside of 15% from where the stock is currently trading.
Mills commented, “We are not surprised by the MDT/HTWR deal this morning, although we are frankly underwhelmed by the price. To explain, despite recent challenges in HTWR’s VAD business – namely MVAD snafus and uncertainty regarding HVAD’s competitiveness with HeartMate 3 (STJ) until we see contemporary Stroke results from the ENDURANCE 2 trial) – we have remained bullish on HTWR, largely due to our belief in the long-term growth potential of the VAD market, and our belief that HTWR would turn the business around (partially predicated on our belief that E2 Stroke results would be positive and MVAD was not dead). In fact, we think in this, latter scenario – i.e. E2 Stroke rates below 15% (i.e. .15 events per patient year) and a narrative regarding MVAD that portended a return to human clinicals before year-end 2017 – could have driven the stock north of $60, even before an acquisition occurred. This is the reason we are underwhelmed by this deal.”
According to TipRanks.com, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Jason Mills has a yearly average return of -5% and a 47.5% success rate. Mills has a -33% average return when recommending HTWR, and is ranked #3704 out of 3980 analysts.
Out of the 6 analysts polled by TipRanks (in the past 3 months), 5 rate HeartWare stock a Buy, while 1 rates the stock a Hold. With a downside potential of 18%, the stock’s consensus target price stands at $47.40