Boston Scientific (NYSE: BSX) -- a heavy spike in recent short interest
This cat surely has nine lives. In the last few years, Boston Scientific has seen steady turnover in its management team, been in court multiple times for patent infringement hearings, been the subject of several Department of Justice investigations, had to conduct a massive recall of its defibrillators in 2010, racked up $5 billion in litigation charges in the past five years and hasn't turned a profit since 2005.
Despite that tale of woe, optimistic investors started snapping up shares in recent months, pushing the stock up nearly 50% since Labor Day. Yet this is still a very troubled company, carrying about $5 billion in debt. To boost growth, Boston Scientific is making acquisitions to bring fresh growth opportunities. Yet some of those deals, such as the one for a heart-valve business, merely represent second-tier offerings in crowded fields.
At a November 2010 meeting with analysts, management ran through a series of steps that intend to boost profits 10% annually, highlighted by cost cuts. But most analysts scoffed at management's targets. Goldman Sachs doubts that cost-cutting will lead the company out of its morass: "Given our below consensus revenue estimates for the foreseeable future, we believe these cost controls will essentially be an offset for lower-than-expected revenue growth rather than incremental growth opportunities." They predict shares will fall back to $6, nearly 20% below current levels.
This cat surely has nine lives. In the last few years, Boston Scientific has seen steady turnover in its management team, been in court multiple times for patent infringement hearings, been the subject of several Department of Justice investigations, had to conduct a massive recall of its defibrillators in 2010, racked up $5 billion in litigation charges in the past five years and hasn't turned a profit since 2005.
Despite that tale of woe, optimistic investors started snapping up shares in recent months, pushing the stock up nearly 50% since Labor Day. Yet this is still a very troubled company, carrying about $5 billion in debt. To boost growth, Boston Scientific is making acquisitions to bring fresh growth opportunities. Yet some of those deals, such as the one for a heart-valve business, merely represent second-tier offerings in crowded fields.
At a November 2010 meeting with analysts, management ran through a series of steps that intend to boost profits 10% annually, highlighted by cost cuts. But most analysts scoffed at management's targets. Goldman Sachs doubts that cost-cutting will lead the company out of its morass: "Given our below consensus revenue estimates for the foreseeable future, we believe these cost controls will essentially be an offset for lower-than-expected revenue growth rather than incremental growth opportunities." They predict shares will fall back to $6, nearly 20% below current levels.