This is why InMode’s stock fell 32% in April
Stocks of a medical device company InMode (INMD -2.29%) fell 32% in April, according to data provided by S&P Global Market Intelligence. On April 11, the company released encouraging preliminary financial results for the first quarter of 2022. But the stock ultimately underperformed the market average by a wide margin and is currently down about 75% from its all-time high of 2021.
Curiously, prominent analysts applauded InMode’s first quarter results, but nonetheless lowered their expectations for the stock.
InMode management released preliminary results for the first quarter showing revenue of $85.5 million on the high end. And he expected to report non-GAAP (generally accepted accounting principles) earnings per share (EPS) of $0.39 at best. In fact, it did better than expected, reporting revenue of $85.9 million and non-GAAP EPS of $0.40 on May 2. These were year-over-year increases of 31% and 18%, respectively.
According to The Fly, Baird analyst Jeff Johnson and canaccord Analyst Kyle Ross lowered his price targets for InMode shares after the official Q1 report. However, Johnson said the balance between risk and reward was now “favorable” and cited InMode’s “outstanding business execution”. In other words, both analysts appeared to applaud the company’s financial results despite the counterintuitive drop from their price targets of $82 per share and $72 per share to $57 per share and $50 per share.
This seems to be a trend in the stock market right now. Regardless of the financial results, investors seem to be lowering their expectations for future returns. And that appears to be the main reason InMode’s stock fell in April.
Slowing revenue growth is one of the few flaws that can be found with InMode right now. Management expects revenue of $415 million to $425 million in 2022, up 16% to 19% from 2021. For the outlook, revenue growth was higher in 2021 at 73%.
Moreover, I think it is fair for investors to question whether it is realistic to achieve these forecasts. After all, consumer inflation is the highest in about 40 years and it looks like consumers are starting to feel the impact. Cosmetic procedures with InMode devices are optional and people can choose to wait if their financial situation is challenged.
That said, the data suggests that’s not happening yet. InMode makes money by selling devices but also by selling consumables when procedures are performed. As management highlighted on its conference call, consumables revenue jumped 79% in the first quarter to a record $14 million, demonstrating higher-than-ever device usage.
With an already installed base of over 6,000 customers and over 12,000 devices, InMode is well positioned for long-term adoption, even if things take a back seat with near-term economic uncertainty. Therefore, down 75% from its peak, now might be a good time to do some more research on InMode stocks.