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On Tuesday, BTIG analyst Sam Elber downgraded InMode Ltd . (NASDAQ:INMD) from Buy to Neutral, citing a continued contraction in the medical aesthetics market. The company, currently trading at $14.26 and near its 52-week low, has seen its stock decline by approximately 9% in the past week alone. Despite initial expectations for stabilization, the firm now faces significant revisions to its estimates, with few signs that InMode will meet its FY25 revenue guidance of $395M-$405M. The downgrade reflects concerns over the impact of a potential recession and lower consumer confidence on capital equipment purchases and aesthetic treatments, particularly given the company’s recent revenue decline of nearly 20%.
InMode’s management has acknowledged the possibility of lowering their revenue guidance if no improvement is seen in the coming months. BTIG notes that InMode’s strategy to expand its commercial teams, despite declining representative productivity and increasing costs, is perplexing given the current market climate. The company’s commitment to not adjusting operating levers in response to slower growth adds to the challenges it faces. According to InvestingPro, two analysts have recently revised their earnings downward for the upcoming period, though the company maintains strong fundamentals with more cash than debt on its balance sheet.Want deeper insights? InvestingPro offers 8 additional key tips and comprehensive analysis for INMD, helping investors make more informed decisions.
The analyst’s downgrade is based on a combination of factors, including the deteriorating margins and the lack of near-term catalysts that could drive growth. Despite these concerns, InMode maintains an impressive gross profit margin of 80.31% and trades at a modest P/E ratio of 7.07. While BTIG understands InMode’s rationale of enduring near-term pain for long-term gain through investment in commercial infrastructure, the firm believes that the current commercial environment does not support a positive outlook for InMode in the immediate future. Based on InvestingPro’s Fair Value analysis, the stock appears undervalued at current levels.
InMode’s decision to expand its commercial teams is expected to lead to additional costs, further straining the company’s financials. This move comes at a time when market conditions are not favorable, and it raises questions about the company’s strategy in the face of declining sales representative productivity.
Despite these concerns, BTIG acknowledges that InMode’s long-term strategy could position it to outperform its peers once the market conditions improve. However, for the time being, the firm’s immediate prospects appear dim, prompting the downgrade from Buy to Neutral. The market will be closely watching InMode’s performance in the upcoming months, particularly any changes to its revenue guidance based on May and June results.
In other recent news, InMode Ltd. announced its preliminary financial results for the first quarter of 2025, revealing revenues between $77.2 million and $77.5 million. These figures fell short of analyst expectations, with Canaccord Genuity and consensus estimates at $90.4 million and $82.2 million, respectively. Despite the shortfall, InMode maintained its full-year revenue guidance of $395 million to $405 million for 2025. Canaccord Genuity maintained its Hold rating with a $17 price target, citing ongoing economic challenges and the need for improved performance throughout the year. Meanwhile, Jefferies upgraded InMode from Hold to Buy, though it reduced the price target to $15 from $16, reflecting cautious optimism about the company’s long-term potential. The upgrade comes despite Jefferies noting the challenges InMode faces in achieving its full-year guidance due to the current economic climate. InMode’s fourth-quarter 2024 results also missed forecasts, with earnings per share of $0.42 and revenue of $97.85 million, both falling short of expectations. Despite these challenges, InMode continues to focus on product launches and strategic changes to bolster its market position.
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