By Jacob Sonenshine
Boston Scientific stock has more questions than answers.
Shares of the medical device maker dropped have about 14% this week to about $49 after management said growth of its Watchman product, an implant that reduces the risk of stroke in patients with non-valvular atrial fibrillation (AFib), is slowing. The company stood by its financial guidance, but the market clearly has larger concerns.
This isn't its first hiccup in recent months. The stock's price has been cut about in half since we recommended it around $100 in October. The company continues to grow, but at a slower rate than previously anticipated. Management issued disappointing guidance on its first quarter earnings release. It called for 6% second quarter sales growth, at the midpoint of the range excluding currency fluctuations and acquisitions. It forecasts an acceleration to 7.25% growth for the full year, which would bring organic revenue up to $21.5 billion.
Our thesis was that Boston Scientific would grow aggressively. In late 2025 the company laid out a path to 10% annual sales growth for the long-term. Much of the company's revenue comes from heart procedures, which investors hoped would grow faster than the overall business. Boston Scientific would also take market share, partly through acquisitions. So the story went. That story is on pause now.
This week's Watchman update is the main cause for concern. CEO Michael Mahoney said the product's sales growth, which was 19% organically to about $506 million in the first quarter, has slowed. He warned about that on the April earnings call, but emphasized it at the conference this week, saying electrophysiologists have shifted away from "stand-alone" procedures, hurting that part of the business. "Concomitant" procedures, those that tackle more than one heart issue simultaneously, are growing and Mahoney reaffirmed the company's guidance. But Wall Street now must consider the possibility that second quarter results will come in at the lower end of the range.
Mahoney mentioned "reimbursement dynamics" as one reason for the poor guidance. This is expected to turn into flat quarter over quarter growth for the product for the second and third quarters this year. Given its revenue for the same quarters last year, this implies low single digit percentage growth year over year.
Competitors for Afib products exist, mainly Abbot Laboratories. Investors are left to wonder whether the company is losing market share.
Analysts have lowered their 2026 sales estimates by about 0.2 percentage points, or $47 million, according to FactSet. The company said it would update its long-term growth guidance after the third quarter report.
Boston Scientific currently trades at 13.8 times its next 12 months' earnings. That sounds cheap, but if earnings expectations drop and the multiple remains constant, shares will almost certainly drop as well. A comparable earnings multiple isn't unprecedented among competitors. Medtronic, whose stock is down in the past five years, trades at 12 times earnings.
The good news is that Boston Scientific's overall earnings are still expected to grow, even if at a slower rate than previously anticipated. Maybe the stock can stage a gradual recovery.
Holding the stock makes some sense, but with diminished prospects for its main growth product we can't justify our Buy rating anymore.
Jacob Sonenshine is a stock picks writer at Barron's Investor Circle and regular contributor to The Trader Column. His general focus is technology, consumer, industrial, and healthcare.
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May 29, 2026 04:03 ET (08:03 GMT)
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