On Tuesday, Baird analyst revised the price target for Inspire Medical Systems (NYSE:INSP), reducing it to $220 from the previous $273, while maintaining an Outperform rating on the stock. Baird's update comes with the anticipation of a slight beat on the top-line revenue for the second quarter (Q2).
Inspire Medical's management has recently confirmed their expectations of year-over-year (Y/Y) growth in utilization for Q2, surpassing Baird's and CNS estimates, which had suggested a low single-digit (LSD) Y/Y decline in U.S. utilization. The analyst notes that even a modest 1% Y/Y increase in utilization would result in a 2% outperformance relative to Baird's global and U.S. revenue forecasts.
Looking forward, Baird anticipates that accelerated growth and utilization in the second half of 2024 will be crucial for restoring investor confidence in the long-term potential of utilization growth
Baird's current models predict low single-digit to mid single-digit (LSD-MSD) growth for the latter half of the year, which, considering the year-over-year comparative benefit seen in Q1, suggests continued LSD Y/Y utilization growth. This growth rate is still below the mid single-digit (MSD) rate Baird believes is attainable and what is expected for FY25/26.
The firm's analysis leads to a 26% growth projection for Inspire Medical's FY24 revenues, assuming the addition of approximately 52 new centers per quarter. While the primary focus is on U.S. utilization growth, Baird also recognizes that international markets could offer potential unanticipated benefits.
Despite a strong Q1 aided by derogation in certain international markets, which allowed for some recapture of procedures, Baird expects international revenues to stabilize at around $5-6 million per quarter, compared to approximately $8 million in Q1.
InvestingPro Insights
Investors keeping an eye on Inspire Medical Systems (NYSE:INSP) can find valuable insights through InvestingPro metrics. The company's market capitalization stands at $4.12 billion, reflecting a notable presence in its sector. Despite recent challenges, the company's revenue growth remains strong, with a 41.71% increase in the last twelve months as of Q1 2024, and a quarterly revenue growth of 28.24% in Q1 2024. This aligns with Baird's expectations of top-line growth and reinforces the potential for continued expansion.
On the profitability front, Inspire Medical Systems is not currently profitable, with a negative operating income margin of -5.45% and a P/E ratio deeply in the negative at -261.69. Nevertheless, analysts anticipate a turnaround, as the company is expected to become profitable this year, which could be a significant driver for future stock performance. Additionally, the company's liquid assets exceed short-term obligations, providing financial flexibility to support ongoing operations and growth initiatives.
For those considering an investment, two InvestingPro Tips highlight key considerations: Inspire Medical Systems holds more cash than debt, ensuring a solid financial foundation, and analysts predict the company will be profitable this year, offering a positive outlook. For more in-depth analysis and additional tips, visit InvestingPro and discover 11 more InvestingPro Tips. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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