BofA Securities has adjusted its outlook on Procept BioRobotics Corp (NASDAQ: PRCT), increasing the price target to $94 from the previous $80 as the firm sustained its Buy rating on the stock.
The revision follows Procept BioRobotics' announcement that it has received FDA clearance for Hydros, its advanced robot designed to treat benign prostatic hyperplasia (BPH). The company intends to commence an immediate product launch.
The stock experienced a significant 30% rise within the day, reflecting investor enthusiasm triggered by the unexpected development. This marked a sharp contrast to the anticipation set during the company's second-quarter earnings call on August 1, where only subtle hints of a new system were mentioned.
The Hydros robot is expected to integrate artificial intelligence into procedure planning and introduce improvements in imaging and workflow efficiency, all while retaining the fundamental Aquablation procedure.
Procept BioRobotics also confirmed its 2024 financial guidance, which had already factored in a third-quarter launch for Hydros. Despite this confirmation, BofA Securities suggests that the guidance may be conservative.
The Hydros robot, along with its handpiece, will be marketed at a higher price point than the current Aquabeam system. While the company has not specified the anticipated price increase for the system and handpiece, the analyst believes that the potential for higher average selling prices (ASPs) could mitigate risks for future estimates and might lead to potential gains exceeding current market projections for 2025 and beyond.
BofA Securities has reiterated its Buy rating, basing the new price target on an enterprise value to sales (EV/Sales) ratio of 11 times the firm's projected 2026 revenue. This is a slight modification from the previous valuation, which was 13 times the estimated 2025 revenue. Adjustments to the firm's estimates were made in light of the expected rise in system ASPs for the years 2025 and 2026.
In other recent news, Procept BioRobotics received FDA clearance for its Hydros robotic system, a significant development for the company. The Hydros system, equipped with AI-driven treatment planning, advanced image guidance, and robotic resection capabilities, is expected to improve clinical procedures' efficiency and outcomes. Procept BioRobotics plans to make the system readily available to hospitals throughout the United States within the current quarter.
InvestingPro Insights
Following the positive developments at Procept BioRobotics and the revised outlook from BofA Securities, InvestingPro provides additional context for investors considering the stock. With a substantial market cap of $4.33 billion and a remarkable revenue growth of 73.74% over the last twelve months as of Q2 2024, Procept BioRobotics appears to be on a growth trajectory. Moreover, the company has shown a strong price performance with a 1-year total return of 164.97%, signaling robust investor confidence which may have been bolstered by the recent FDA clearance news.
InvestingPro Tips highlight that analysts have recently revised their earnings upwards for the upcoming period, reflecting optimism in the company's financial prospects. Additionally, the stock's significant return over the last week of 32.44% aligns with the sharp rise mentioned in the article following the FDA clearance announcement. For investors looking for more detailed analysis, InvestingPro offers numerous additional tips on Procept BioRobotics, which can be found at InvestingPro Procept BioRobotics.
It's important to note, however, that the company operates with a negative P/E ratio, currently standing at -27.89, and has not been profitable over the last twelve months. This indicates that while the company's growth prospects are promising, it is still in a phase where it is not generating profits. This is a critical consideration for investors who prioritize profitability and may want to weigh the potential for future earnings against the current lack of profitability.
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