On Thursday, Stifel adjusted its outlook on Alphatec Holdings (NASDAQ:ATEC), reducing the price target on the company's shares to $19.00 from the previous $24.00. Despite the downward revision, the firm continues to recommend buying the stock. The cut in the price target reflects a broader contraction in medical technology (MedTech) sector valuations, though Stifel still anticipates that Alphatec's performance may improve in the second half of 2024.
The analyst from Stifel addressed the primary concerns raised by market skeptics regarding Alphatec's financial health and market position. These concerns include the company's ability to sustain its rapid revenue growth given its current liquidity and the potential need for dilutive capital raises if the cash burn continues at the present rate.
Additionally, there is apprehension about the strength of Alphatec's balance sheet and the competitive nature of the spine market, which is seen as commoditized with limited growth opportunities.
Stifel's analysis attempts to qualitatively and quantitatively counter these bearish viewpoints. The firm argues that the market's skepticism is excessive and that the valuation of Alphatec's shares is overly punitive. Stifel believes that as 2024 progresses, the concerns surrounding Alphatec's profitability and liquidity will diminish, and the company's revenue growth is expected to persistently exceed expectations.
The analyst's commentary suggests a positive outlook for Alphatec, projecting that the current challenges will be overcome as the year advances. This optimism is based on the belief that the company will be able to address the liquidity issues and continue to grow revenue, contrary to the bearish arguments.
In conclusion, Stifel has revised its price target for Alphatec Holdings to $19, a decision influenced by the general downturn in MedTech valuations. Nevertheless, the firm maintains a buy rating on the stock, with expectations of a rebound in the latter half of the year.
In other recent news, Alphatec Holdings demonstrated robust growth in its first quarter with a 27% surge in total revenue, reaching $138 million, and a notable 30% growth in surgical revenue. Adjusted EBITDA also expanded by 450 basis points. The company has further raised its full-year forecast, highlighting its strong performance. On the analyst front, Barclays (LON:BARC) initiated coverage on Alphatec with an Overweight rating and a price target of $19, while Piper Sandler maintained an Overweight rating on Alphatec's stock, despite reducing its price target from $19.00 to $17.00.
In terms of company developments, Alphatec recently underwent significant changes to its board of directors, including the departure of four directors and the election of nine new ones. The company's shareholders ratified the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for the fiscal year ending December 31, 2024, and approved the compensation of the company's named executive officers.
Alphatec also announced expansion plans, focusing on international markets such as Australia, New Zealand, and Japan. The company expects total revenue to reach around $601 million for 2024 and aims to achieve cash flow breakeven by 2025. These are the latest developments in Alphatec's ongoing efforts to strengthen its market position and future performance.
InvestingPro Insights
Recent data from InvestingPro provides a mixed picture for Alphatec Holdings, aligning with the cautious yet optimistic stance taken by Stifel. The company has demonstrated a significant return over the last week of 7.92%, which may signal investor confidence in its short-term prospects. Additionally, Alphatec's liquid assets do exceed its short-term obligations, suggesting that the company has some financial flexibility to manage its rapid revenue growth, which has been robust at 31.51% over the last twelve months as of Q1 2024.
Despite these positive indicators, analysts note that Alphatec is not expected to be profitable this year and has not been profitable over the last twelve months. Moreover, the company is trading at a high Price/Book multiple of 40.12, which could be a concern for value-oriented investors. These InvestingPro Tips highlight the importance of balancing growth expectations with financial stability, especially in a competitive market like MedTech.
For those considering an investment in Alphatec or seeking more in-depth analysis, there are additional InvestingPro Tips available that could further inform your decision. Remember to use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and unlock the full suite of tips and metrics that InvestingPro offers. With 6 more InvestingPro Tips available, investors can gain a comprehensive understanding of Alphatec's financial health and market position.
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