On Friday, Piper Sandler adjusted its outlook on TELA Bio, Inc. (NASDAQ: NASDAQ:TELA) shares, a medical technology company, reducing the price target to $5 from the prior $8. Despite this change, the firm retained its Overweight rating on the stock. The adjustment followed TELA Bio's reporting of its third-quarter results, which surpassed the analyst's initial expectations, even after a recent preannouncement.
TELA Bio's quarterly report indicated that while gross margins were somewhat disappointing, the company's stringent cost control measures led to a smaller than anticipated EBIT loss. According to the analyst, TELA Bio has been successfully gaining market share and is well-positioned to continue this trend, particularly as competitors intensify their focus on biologics.
This shift could potentially open up new account opportunities for TELA, whose products are considered by the analyst to be both superior and more cost-effective.
The firm also noted TELA Bio's strategic efforts to cut operational expenses in the upcoming year. Following a capital raise, the company is expected to be in a stronger position to enhance its financial performance across the board. Despite the stock's historical volatility, the analyst expressed confidence in the company's product, describing it as a potential game-changer that could lead to significant value creation.
In summary, Piper Sandler's updated price target reflects a cautious but optimistic view of TELA Bio's future financial performance. The company's recent third-quarter results and strategic adjustments appear to underpin the analyst's continued positive outlook on the stock.
In other recent news, TELA Bio, Inc. reported a slight exceedance of Wall Street's sales forecast for the quarter, with a preannouncement of $19.0 million in sales. The company also reported a gross margin of 68% and announced plans for an equity raise. Canaccord Genuity has maintained their positive ratings on TELA Bio, despite adjusting their price targets.
In parallel, TELA Bio has launched a public offering of its common stock and pre-funded warrants, with proceeds planned to be directed towards various corporate purposes. The company also reported an 11% year-over-year revenue growth in its second quarter, reaching $16.1 million.
In the face of recent litigation surrounding the use of permanent polypropylene mesh in hernia surgeries, TELA Bio's OviTex hernia mesh products have been highlighted for their potential increased adoption. The company has also introduced a new inguinal hernia repair product line, aiming to capture a broader market segment.
Despite facing challenges such as cyberattacks and changes in physician staff, TELA Bio upholds its annual revenue guidance, projecting a 27-31% year-over-year revenue growth. The company's future expectations also include lower operating and net losses in 2024 compared to 2023, with steady or slightly lower operating expenses and reduced cash consumption in the latter half of the year.
InvestingPro Insights
TELA Bio's recent performance and future prospects can be further illuminated by data from InvestingPro. The company's revenue growth of 31.64% over the last twelve months as of Q2 2023 aligns with Piper Sandler's observation of TELA Bio gaining market share. This growth is particularly impressive given the competitive landscape described in the article.
However, investors should note that TELA Bio is currently not profitable, with an adjusted operating income of -$46.44 million over the same period. This underscores the importance of the company's cost-cutting initiatives mentioned in the analyst report. An InvestingPro Tip highlights that TELA Bio is "quickly burning through cash," which contextualizes the recent capital raise and the need for improved financial performance.
On a positive note, another InvestingPro Tip indicates that TELA Bio's "liquid assets exceed short term obligations," suggesting a degree of financial stability in the near term. This could provide the company with some runway to execute its growth strategy and potentially achieve profitability.
For investors seeking a more comprehensive analysis, InvestingPro offers 7 additional tips for TELA Bio, providing a deeper understanding of the company's financial health and market position.
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