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InMode Ltd . (NASDAQ: NASDAQ:INMD) maintained its Hold rating with a steady price target of $16.00, as per Canaccord Genuity. Despite InMode's efficient processing of its backlog, the firm noted that demand challenges persist, with a Q4 outlook that suggests softness ahead. Although a recent share buyback announcement was seen as positive, the extent of management changes and global restructuring introduced this month by InMode has added complexity to its operational narrative.
The company's recent public relations announcement indicated potential production relocation outside Israel due to the current turmoil, which could impact access to components and exacerbate supply issues. On the demand side, while recent Federal Reserve rate cuts are favorable, the impact on financing rates for aesthetic equipment is expected to be gradual.
InMode did not provide details on the Q3 revenue mix between capital and consumables. However, a notable decline in U.S. consumable demand in Q2 hinted at decreasing patient interest, and Q3 is traditionally a slower period for patient demand.
Canaccord's forecast for InMode for the fiscal year 2024 remains slightly below the company's guidance, reflecting the ongoing risks despite the previous quarter's more significant discrepancy. The firm's position is cautious, citing macroeconomic and geopolitical uncertainties as factors that limit InMode's control over its performance. Consequently, Canaccord is awaiting clearer signals from the broader market before reconsidering its stance on InMode's stock.
InMode Ltd. has reported a third-quarter revenue projection of approximately $130.0-130.1 million, surpassing market expectations and reflecting a 5.6% year-over-year growth. This projection includes $31.9 million from new platform pre-orders made in the first half of 2024. Despite operational challenges and macroeconomic factors affecting the aesthetic industry, InMode anticipates a strong third-quarter gross margin between 81-82%. However, the company has revised its full-year 2024 revenue guidance downward to $410-420 million.
The company has also initiated a new share repurchase program, authorizing the buyback of up to 7.68 million ordinary shares. This follows a significant share buyback where the company repurchased 8.37 million shares. These developments are part of InMode's ongoing efforts to navigate market challenges while continuing to innovate in the medical aesthetic treatment sector.
InvestingPro Insights
InMode's current financial situation presents a mixed picture, as revealed by recent InvestingPro data. The company's market capitalization stands at $1.36 billion, with a P/E ratio of 8.96, suggesting a potentially undervalued stock. This is further supported by an InvestingPro Tip indicating that the stock's valuation implies a strong free cash flow yield.
However, the company faces challenges, as evidenced by its revenue growth of -16.16% over the last twelve months and a more severe quarterly revenue decline of -36.47% in Q2 2024. These figures align with Canaccord Genuity's observations about persistent demand challenges and the softness expected in Q4.
On a positive note, InMode maintains a strong financial position. An InvestingPro Tip highlights that the company holds more cash than debt on its balance sheet, which could provide flexibility during this period of operational restructuring and potential production relocation. Additionally, the company's high shareholder yield, as noted by another InvestingPro Tip, may appeal to investors despite the current headwinds.
For readers seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for InMode, providing deeper insights into the company's financial health and market position.
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