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On Monday, Tiger Securities analysts revised their outlook on Ispire Technology (NASDAQ:ISPR), reducing the price target from $6.50 to $5.50, while maintaining a Hold rating on the stock. Currently trading at $4.55, significantly below its 52-week high of $12.14, InvestingPro analysis suggests the stock is slightly undervalued. The adjustment follows Ispire Technology’s report of stronger second-quarter revenue, albeit with softer margins. The analysts noted that the company’s timeline to reach break-even is expected to be delayed by one quarter, previously anticipated in the March quarter, due to a strategic shift in the United States.
Ispire Technology’s total revenue remained flat year-over-year at $41.8 million, surpassing analysts’ estimates by 9%. The company’s trailing twelve-month revenue stands at $148.52M, with a gross margin of 21.6%. This was despite a 45% year-over-year decline in U.S. revenue, which primarily consists of cannabis sales, amounting to $10.9 million. The company has been focusing on enhancing customer quality over quantity, leading to tighter receivable policies.
The gross margin for the company was reported at 18.5%, a slight decrease of 1 percentage point from the first quarter. Ispire Technology also experienced negative operating cash flow of $3.2 million. As part of its strategic realignment, the company is moving operations from the U.S. to Malaysia and Hong Kong, which is expected to yield $8 million in annual cost savings. However, this transition is likely to result in one-off expenses in the upcoming quarter, which contributes to the delay in achieving a break-even point and positive cash flow.
Looking ahead, Ispire Technology is preparing a Pre-Market Tobacco Application (PMTA) submission to the U.S. Food and Drug Administration (FDA) for April 2025. This submission will seek approval for a novel age-verification nicotine delivery system. InvestingPro subscribers can access detailed financial health metrics and 8 additional ProTips that provide crucial insights into the company’s operational efficiency and growth potential. Get access to the comprehensive Pro Research Report, available for over 1,400 US stocks, to make more informed investment decisions. If granted, this technology could be a significant development, as it is a component PMTA that aims for approval of a standalone age-gating technology, which could then be licensed to various manufacturers and incorporated into a broad spectrum of nicotine products.
In other recent news, Ispire Technology Inc. reported a net loss for the fourth quarter of 2024, with earnings per share (EPS) of -$0.14, falling short of analyst expectations. The company’s revenue for the quarter was $41.8 million, reflecting a slight increase of 0.3% year-over-year. Despite the earnings miss, Ispire is expanding its presence in Africa and preparing new product launches in the UK.
Analysts noted that Ispire’s Q4 2024 EPS was significantly below the forecasted $0.01, and its revenue of $41.8 million also fell short of the expected $48 million. However, the company’s strategic initiatives and operational improvements, such as cost-saving measures and international expansion, contributed to a positive operating cash flow.
Ispire’s Co-CEO, Michael Wang, emphasized the company’s strategic focus on international expansion and regulatory compliance. The company plans to increase its store presence in Africa to 2,000 locations and aims to submit a PMTA component application in April 2025, introducing 6-10 new flavored products. Ispire’s recent developments show its commitment to driving international growth while navigating complex regulations in the global nicotine market.
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