On Thursday, Canaccord Genuity adjusted its outlook on shares of InMode Ltd . (NASDAQ:INMD), reducing the price target to $16 from the previous $21, while maintaining a Hold rating on the stock. The revision reflects concerns over a challenging operating environment, as indicated by the company's Q2 preliminary estimates falling below consensus and another reduction in guidance.
InMode has been experiencing difficulties with providers securing financing, which has led the company to take on some of the risk, currently up to 6%, in partnership with third-party financing companies to expedite lease decision-making.
Moreover, the anticipation of a U.S. interest rate cut that did not materialize last month is affecting the return on investment for providers using InMode's systems. These factors are contributing to a persistent weakness in capital demand, which is particularly problematic for InMode, given that over 80% of its revenue comes from capital sales.
The company is also facing a slowdown in procedures, mainly in North America, which is expected to negatively impact the growth of consumables and further exacerbate the weakness in capital sales. Moreover, political turmoil in Israel has affected InMode's ability to manufacture its two next-generation devices launched earlier this year.
As a result, the company has resorted to pre-selling these devices and providing customers with the first-generation devices in the interim. These pre-sales are recorded in pro-forma revenues, with InMode anticipating resolving the manufacturing issues by the end of the year, aligning FY/24 proforma and GAAP revenues.
Given the sustained headwinds to both demand and manufacturing, coupled with the lack of a clear resolution to these challenges and continued downward revisions in FY/24 guidance, Canaccord Genuity expresses skepticism regarding InMode's ability to meet current market expectations.
The firm's FY/24 estimate for InMode is below the company's guidance, reflecting this cautious stance. Canaccord Genuity's position remains a Hold as they await more clarity on the broader macroeconomic and geopolitical landscape affecting InMode's performance.
In other recent news, InMode Ltd. reported significant developments. The company's first-quarter 2024 revenue reached $80.3 million, but due to industry headwinds and a slowdown in sales, the full-year guidance has been adjusted downward. Despite these challenges, InMode launched two new platforms, IgniteRF and Optimus Max, with the expectation of bolstering growth.
In response to these developments, UBS has adjusted its outlook on InMode by reducing its price target from $26.00 to $20.00 while maintaining a Neutral rating on the stock. This decision followed InMode's significant miss on operating margins, which came in at 27.5% instead of the anticipated 40%.
UBS noted that InMode has sufficient financial flexibility to continue investing in its business despite ongoing macroeconomic challenges. However, the firm also highlighted the risk for InMode's performance extending into 2024 due to the current lack of clarity regarding the macroeconomic situation. These are some of the recent developments for InMode Ltd.
InvestingPro Insights
In light of InMode Ltd.'s (NASDAQ:INMD) recent challenges, the current financial metrics from InvestingPro provide additional context for investors. With a market capitalization of $1.45 billion and a robust gross profit margin of 83.1% in the last twelve months as of Q1 2024, InMode demonstrates considerable efficiency in its operations.
This efficiency is further underscored by an operating income margin of 37.05% during the same period. Notably, the company's P/E ratio stands at 8.04, suggesting a potentially attractive valuation for investors considering its strong free cash flow yield, an InvestingPro Tip that hints at possible undervaluation.
Another InvestingPro Tip to consider is that InMode holds more cash than debt on its balance sheet, which could provide a cushion against the current macroeconomic and geopolitical uncertainties. Moreover, InMode's stock is trading near its 52-week low, which may interest value investors seeking entry points during market downturns.
For those looking to delve deeper into InMode's financials and future outlook, InvestingPro offers a range of additional tips. Investors can explore these insights and make more informed decisions by using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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