Canaccord raises Neuronetics stock target to $8, maintains buy rating

On Tuesday, Canaccord Genuity increased its price target for Neuronetics (NASDAQ:STIM) shares to $8.00 from the previous $5.00 while maintaining a Buy rating on the stock. The adjustment follows Neuronetics’ reported fourth-quarter earnings, which slightly exceeded the company’s earlier forecast. The stock has shown remarkable momentum, with a 515% surge over the past six months and is currently trading near its 52-week high of $5.32. According to InvestingPro analysis, the stock appears overvalued at current levels, with additional insights available in the comprehensive Pro Research Report.

Neuronetics, a medical technology company, announced a fourth-quarter revenue of $22.5 million, marking an 11% year-over-year increase. This figure was a slight improvement over the company’s January preannouncement of $22.1 million. The company maintains a healthy gross profit margin of 78.3% and a strong current ratio of 3.16, though InvestingPro data shows it’s not yet profitable, with an EBITDA of -$23.48 million in the last twelve months. Additionally, Neuronetics reaffirmed its 2025 guidance, which it had initially provided in January. The forecast for the fiscal year 2025 includes revenue ranging from $145 million to $155 million, representing a 12-19% year-over-year increase on a pro forma basis for the newly merged entity. The company also expects a gross margin of approximately 55%, operating expenses between $90 million and $98 million, and to achieve positive cash flow by the third quarter of 2025.

The fourth-quarter revenue included $4.4 million from U.S. clinic operations, which reflects income from Greenbrook TMS following its acquisition. The merger with Greenbrook, Neuronetics’ largest customer, was completed in December 2024 and is already demonstrating benefits. Neuronetics anticipates realizing 90% of the $22 million in projected deal synergies by the end of 2024 and aims to reach cash flow positivity in the third quarter of 2025.

The company’s strategy for 2025 is centered on two main objectives: increasing the utilization of its systems, which includes independent physicians and Greenbrook clinics, and growing revenue from the SPRAVATO treatment at Greenbrook locations. Neuronetics is also shifting its focus away from capital sales to drive utilization, a move that is expected to mitigate some macroeconomic challenges and enhance the combined company’s gross margins. This shift is seen as pivotal for achieving sustained operating profitability and positive free cash flow. InvestingPro analysis reveals the company operates with a moderate debt level and maintains liquid assets exceeding short-term obligations, providing financial flexibility for this strategic transition. Discover more detailed insights and 13 additional ProTips with an InvestingPro subscription.

In other recent news, Neuronetics Inc. reported its fourth-quarter 2024 earnings with a net loss of $0.33 per share, missing the forecasted loss of $0.24 per share. However, the company achieved a revenue of $22.5 million, surpassing expectations of $18.97 million. The revenue marked an 11% increase year-over-year, driven by strong sales of the NeuroStar system and increased treatment sessions in the U.S. Neuronetics also completed the acquisition of Greenbrook TMS, which expanded its treatment network. This strategic move is expected to bolster the company’s presence in the mental health treatment market. Additionally, Neuronetics raised $18.9 million in capital post-year-end, enhancing its financial flexibility. Analysts have noted that the company has set a revenue guidance of $145-$155 million for 2025, with a focus on expanding its Better Me Provider program. The company aims to achieve cash flow positivity by the third quarter of 2025.

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