Morgan Stanley's Heart Skips a Beat; Upgrades St. Jude Medical

In a report published Monday, Morgan Stanley analyst David Lewis upgraded

from Equal-weight to Overweight and announced a $75.00 price target. Lewis noted that Morgan Stanley is optimistic on guidance achievability in 2014 and St. Jude's pipeline. The analyst commented that Street estimates appear conservative in the top and bottom line. Morgan Stanley reported that investors should not be concerned about gross margin guidance as underappreciated EPS accretion and recent restructuring suggests that these numbers are not at risk. The analyst continued, noting that CadioMEMS is the biggest catalyst in 2014. Lewis wrote, “We are comfortable with this binary event considering (i) positive FDA panel commentary, and (ii) our estimates that do not assume substantial traction. Our December 2013 AlphaWise survey of 61 US electrophysiologists increased our conviction in the pace of adoption and ultimate market size for CardioMEMS. If St. Jude achieved $250 million in CardioMEMS sales at a 50% incremental margin, it would drive about $0.35 in EPS accretion (8%), implying an additional $5 per share in equity value.” Shares of St. Jude closed at $61.19 on Friday and is currently trading up as much as 4.837% at $64.15.