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On Friday, Canaccord Genuity adjusted its outlook on TELA Bio, Inc. (NASDAQ:TELA), reducing the price target on the company’s shares to $7.00 from the previous $12.00, while still holding a Buy rating on the stock. Currently trading at $2.34, near its 52-week low of $2.18, InvestingPro analysis suggests the stock is undervalued. InvestingPro subscribers have access to 6 additional key insights about TELA Bio’s current market position and future prospects. The medical technology company experienced a challenging quarter, with revenue falling significantly short of consensus expectations. The shortfall was attributed to the loss of sales representatives to competitors during the fourth quarter, further impacting a sales organization that was already slim following a commercial streamlining effort in the third quarter.
Despite a strong start to the quarter in October, TELA Bio faced obstacles including sales rep poaching and intravenous (IV) shortages that affected performance in November and December. However, the company’s new product launches in the United States earlier in the year have shown promise, contributing to impressive revenue growth of 29.34% over the last twelve months and maintaining a strong gross profit margin of 68.86%. TELA Bio’s inguinal hernia and Liquifix products have generated over $1 million and nearly $1 million in cumulative sales, respectively. These products are expected to help the company expand into high-volume inguinal procedures and capitalize on its robotic capabilities.
The company has observed a decrease in average selling price (ASP) due to the success of its lower-priced inguinal hernia repair (IHR) product line compared to its larger, higher ASP complex hernia solutions. Although this trend is expected to continue, it is anticipated to eventually stabilize. Looking ahead, TELA Bio is preparing for the 2025 launch of its larger PRS LTR (long-term resorbable) products, which are projected to contribute to stable or increasing ASPs in the PRS segment.
Additionally, TELA Bio received approval for a PRS breast reconstruction Investigational Device Exemption (IDE) trial in the fourth quarter. Despite facing external challenges such as cyber attacks on customers and sales rep poaching, as well as internal challenges like the mid-year commercial streamlining, the company’s management team has been recognized for their quick response in recovering sales organization counts. The core group of high-producing sales reps remains intact, with enhanced incentives to boost productivity.
TELA Bio is exercising caution in its guidance for the first quarter, projecting single-digit year-over-year growth. Canaccord Genuity’s analyst noted the resilience of TELA Bio’s experienced MedTech management team and indicated that a more significant shift in sentiment would require sustained turnover within the sales organization. Despite the reduction in the price target, the firm’s Buy rating stands, reflecting a continued positive outlook on TELA Bio’s stock. InvestingPro data shows the company maintains a healthy current ratio of 2.62, though it faces profitability challenges with negative EBITDA. For deeper insights into TELA Bio’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, TELA Bio, Inc. reported fourth-quarter revenue of $17.6 million, which was below the analyst consensus estimate of $23.17 million. The company’s adjusted earnings per share were -$0.23, slightly missing the forecast of -$0.22. TELA Bio’s guidance for the first quarter of 2025 projects revenue between $17.0 million and $18.0 million, indicating modest growth. For the full year 2025, the company anticipates revenue between $85.0 million and $88.0 million, suggesting a growth rate of 23% to 27%. Piper Sandler downgraded TELA Bio’s stock from Overweight to Neutral, reducing the price target to $2.00 from $5.00, following the earnings miss and weak guidance. Citizens JMP also adjusted its price target for TELA Bio, cutting it to $7.00 from $12.00, yet maintained a Market Outperform rating. The adjustments from both firms reflect concerns over sales challenges and turnover within TELA Bio’s sales force. Despite these challenges, TELA Bio’s management remains optimistic about capturing additional market share and improving profitability.
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