Needham cuts Hologic stock rating on growth concerns

Monday, Needham analysts downgraded Hologic stock from a Buy to a Hold rating, citing multiple challenges that could impede the company’s revenue and profit growth in the calendar year 2025 (CY25). The medical technology company, currently trading at $72.14, maintains a "GREAT" financial health score according to InvestingPro analysis, despite trading near its 52-week low. The concerns highlighted by Needham include an anticipated slowdown in mammography gantry placements due to the nearing completion of the 3D mammography conversion and the wait for a new gantry launch slated for CY26. Additionally, the proposed changes to the U.S. Preventive Services Task Force (USPSTF) recommendations are expected to impact cytology growth negatively. Despite these challenges, Hologic maintains robust financials with $4.03 billion in revenue and an impressive 60.73% gross margin.

The analysts at Needham also pointed to the slower operating margin improvement as a factor for the downgrade. They noted that during a recent investor conference, Hologic’s management had effectively revised its long-term revenue growth target down from 5-7% to a mid-single-digit percentage, which Needham interprets as 4-6%. However, the analysts expect the company’s growth to fall below this updated range in CY25.

In their commentary, Needham analysts stated, "We are downgrading HOLX shares from Buy to Hold, since we believe that it is facing several headwinds that we believe will result in slower top and bottom line growth in CY25." They elaborated on the specific headwinds that could potentially hinder Hologic’s performance, including the timing of technology rollouts and changes in industry recommendations that could affect product demand.

The downgrade reflects Needham’s cautious stance on Hologic’s near-term growth prospects amid these identified industry and company-specific challenges. The firm’s analysis suggests that investors may need to adjust their expectations for Hologic’s performance in the coming year. Notably, analyst price targets range from $70 to $95, reflecting mixed sentiment about the company’s prospects. For deeper insights into Hologic’s valuation and growth potential, InvestingPro subscribers can access 10+ additional expert tips and comprehensive financial analysis.

Hologic, listed on NASDAQ: HOLX, will now be navigating the market with a Hold rating from Needham, as it addresses the headwinds and aims to meet its revised growth targets. The company’s response to these challenges and its strategies for growth will be closely watched by investors and analysts alike. For a complete understanding of Hologic’s market position and future potential, investors can access the detailed Pro Research Report available exclusively on InvestingPro, which is part of their coverage of 1,400+ US equities.

In other recent news, Hologic Inc (NASDAQ:HOLX) has announced significant changes to its Board of Directors. Long-serving member Sally W. Crawford will not stand for re-election at the 2025 Annual Meeting of Stockholders, marking her retirement after over 17 years with the company. Scott T. Garrett is also set to retire due to reaching the company’s set retirement age. This will reduce the board size from ten to eight members.

Hologic has finalized its acquisition of Gynesonics, a medical device company, for $350 million, expanding its portfolio of women’s health solutions. The centerpiece of this acquisition is the Sonata System, a technology designed for the transcervical treatment of symptomatic uterine fibroids.

Analysts from Needham have adjusted their estimates for Hologic’s first and second quarters of fiscal year 2025, anticipating similar revenue and earnings per share with a positive adjustment expected in the latter half of the year. Stephens has maintained an Overweight rating for Hologic, following the updated cervical cancer screening guidelines by the US Preventive Services Task Force (USPSTF), which Hologic has supported. However, Jefferies initiated coverage on Hologic with a Hold rating, expressing concerns about its near-term prospects.

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