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On Friday, Piper Sandler adjusted its stance on TELA Bio, Inc. (NASDAQ:TELA), downgrading the stock from Overweight to Neutral and reducing the price target significantly to $2.00 from the previous $5.00. The stock, currently trading near its 52-week low at $2.34, has experienced a steep 56% decline over the past year. According to InvestingPro data, the company’s market capitalization stands at $92.17 million. The downgrade followed TELA Bio’s fourth-quarter earnings report, which failed to meet the expectations set by Piper Sandler analysts.
The company’s latest financial results revealed a substantial shortfall, attributed in part to significant turnover within its sales force. According to the report, a number of sales representatives were poached towards the end of the quarter, impacting the company’s performance. Despite these challenges, InvestingPro data shows the company achieved impressive revenue growth of 29.34% in the last twelve months, though analysts do not expect profitability this year. Additionally, TELA Bio’s guidance for the upcoming year was below the targets initially set by Piper Sandler, signaling a challenging ramp-up period ahead.
Analysts at Piper Sandler highlighted concerns regarding the company’s sales outlook, considering the influx of new representatives who may require time to reach full productivity. Furthermore, the firm noted that TELA Bio’s operational expenditures are expected to remain flat year over year, which could hinder the company’s ability to achieve its top-line goals.
The management team at TELA Bio expressed confidence in their financial position, believing they possess sufficient cash reserves to reach a break-even point. While the company maintains a healthy current ratio of 2.62, indicating strong short-term liquidity, Piper Sandler analysts suspect that the company may need to seek additional financing, a move that could potentially exert downward pressure on the stock’s value. For deeper insights into TELA Bio’s financial health and detailed analysis, investors can access the comprehensive Pro Research Report available on InvestingPro, which covers over 1,400 US stocks.
In light of these factors, Piper Sandler has opted for a more cautious approach, stepping back from its previous Overweight rating and lowering its price target, reflecting the firm’s revised outlook for TELA Bio’s stock performance.
In other recent news, TELA Bio reported fourth-quarter revenue of $17.6 million, which fell short of analyst expectations of $23.17 million. The company’s adjusted earnings per share were -$0.23, slightly below the projected -$0.22. TELA Bio attributed its performance to a mix of temporary disruptions and issues that have been addressed. The gross margin decreased to 64% from 68% due to higher expenses related to excess inventory adjustments. For the full year 2024, the company reported revenue of $69.3 million, a 19% increase from 2023, driven by increased demand for its OviTex and OviTex PRS products. Looking ahead, TELA Bio provided guidance for first-quarter 2025 revenue between $17.0 million and $18.0 million, indicating a growth of 2% to 8% year-over-year. For the entire year of 2025, the company projects revenue between $85.0 million and $88.0 million, suggesting a growth range of 23% to 27%. CEO Antony Koblish expressed optimism about the company’s future, citing efforts to capture more market share and restore growth.
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