Tarsus stock holds Buy rating and $73 target at H.C. Wainwright

On Wednesday, H.C. Wainwright reaffirmed a Buy rating and a $73.00 price target on Tarsus Pharmaceuticals (NASDAQ:TARS), despite the stock experiencing a 9.3% decline following the company’s fourth-quarter earnings report. According to InvestingPro data, TARS has fallen 16.67% over the past week, with the stock currently appearing undervalued based on Fair Value analysis. Analysts at H.C. Wainwright addressed investor concerns that had contributed to the stock’s drop, which outpaced the broader biotech sector’s XBI index decrease of 1.6%.

The concerns highlighted by investors included cautious first-quarter guidance for XDEMVY bottle volumes, an increase in marketing spending with significant direct-to-consumer investment, and higher research and development expenses for TP-04 and TP-05, the latter involving a pivotal development with thousands of patients and an uncertain risk profile. Despite these concerns, InvestingPro data shows the company maintains strong financial health with an impressive 92.99% gross profit margin and a healthy current ratio of 4.42, indicating solid liquidity.

Despite these factors, H.C. Wainwright analysts expressed confidence in Tarsus Pharmaceuticals’ prospects. They have increased their revenue projections for XDEMVY by 5% for the year 2025 and between 3-5% for subsequent years. The analysts believe that the market is underestimating Tarsus, emphasizing the stock’s value when considering just the U.S. market potential for XDEMVY, not to mention the additional upside from international revenue, the lotilaner pipeline, or business development opportunities. This optimism is supported by the company’s remarkable revenue growth of 948.62% in the last twelve months, as reported by InvestingPro, which offers comprehensive analysis through its Pro Research Report, available for over 1,400 US stocks.

The firm’s long-term revenue outlook is expected to offset the increases in spending, and the analysts have reiterated their $73.00 price target based on discounted cash flow analysis. They also noted Tarsus Pharmaceuticals’ attractive growth profile, high gross margins, and intellectual property protection until 2038, suggesting that the longer the stock remains at current levels, the more appealing it becomes as a potential acquisition target in the ophthalmology space. Subscribers to InvestingPro can access additional insights, including 12 more ProTips and detailed valuation metrics that help evaluate acquisition potential.

In other recent news, Tarsus Pharmaceuticals announced its fourth-quarter 2024 earnings, reporting revenue of $66.4 million, surpassing the expected $57.53 million. The company also reported an earnings per share (EPS) of -$0.60, which was better than the forecasted -$0.77. These results reflect the company’s strategic initiatives, such as an expanded sales force and direct-to-consumer campaigns, which have bolstered its market position. Additionally, Tarsus maintains a strong presence in the eye care sector, with ongoing developments in treatments for ocular conditions and Lyme disease prevention. The company’s cash and cash equivalents at year-end were $291.4 million, with total operating expenses reaching $303.5 million. Gross margins stood at approximately 93%, indicating effective cost management. Tarsus has projected non-linear growth for 2025, with more robust performance anticipated in the second and fourth quarters. The company plans to invest significantly in direct-to-consumer campaigns, with an annual budget of $60-70 million.

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