On Monday, Barclays initiated coverage on Alphatec Holdings (NASDAQ:ATEC), a company specializing in the design and development of spinal surgery technologies, with an Overweight rating and a price target of $19. The firm's assessment follows Alphatec's notable 30% growth in Q1 Surgical sales, a performance that stands out even when compared to the 55% growth achieved in the same quarter of the previous year.
The new price target represents an increase based on a 4.0x EV/Sales multiple on the projected next twelve months (NTM) Sales of $792 million. This valuation is consistent with the average EV/Sales multiple of ~4x for the firm's small to mid-cap (SMID Cap) comparison group and aligns with Alphatec's long-term average multiple of 3.9x.
Barclays' positive outlook is partly due to the current market valuation of Alphatec's stock, which is trading at approximately one standard deviation below its long-term average EV/Sales ratio. Additionally, the stock is valued 1-2 turns below its comparables in the SMID-cap category. This underperformance in stock valuation, despite strong sales growth, is seen as an attractive entry point for investors.
The coverage initiation comes after concerns were raised over the deployment of instruments and inventory management in Q1. These concerns have contributed to the stock's current undervaluation, as highlighted by the firm.
Barclays' analyst cited the company's robust growth in a challenging environment and the alignment of the price target with industry standards as key factors supporting the Overweight rating. This endorsement suggests confidence in Alphatec's market position and future performance.
In other recent news, Alphatec Holdings Inc. reported a 27% surge in total revenue, reaching $138 million in the first quarter, with a notable 30% growth in surgical revenue. Adjusted EBITDA also expanded by 450 basis points, exceeding analysts' expectations. The company has further raised its full-year forecast, indicating robust growth.
At their recent Annual Meeting of Stockholders, Alphatec announced significant changes to its board of directors, including the departure of four directors and the election of nine new ones. Shareholders also ratified the appointment of Deloitte & Touche LLP as the independent registered public accounting firm for the fiscal year ending December 31, 2024, and approved the compensation of the company's named executive officers.
Piper Sandler, an investment firm, maintained an Overweight rating on Alphatec's stock, despite reducing its price target from $19.00 to $17.00. The firm recognized Alphatec's successful execution of strategic goals and potential for growth in the orthopedics and medical technology sectors.
In addition to these developments, Alphatec has announced expansion plans, focusing on international markets such as Australia, New Zealand, and Japan. The company expects total revenue to reach around $601 million for 2024 and aims to achieve cash flow breakeven by 2025.
InvestingPro Insights
In light of Barclays' optimistic assessment of Alphatec Holdings, it's noteworthy to consider the real-time financial data and analysis provided by InvestingPro. With a market capitalization of $1.44 billion and a significant revenue growth of 31.51% in the last twelve months as of Q1 2024, Alphatec's financial health appears robust. The company's strong revenue growth is complemented by a gross profit margin of 65.89%, underscoring its efficiency in generating income relative to the costs of goods sold.
However, Investors should be aware of the company's current lack of profitability, as analysts do not expect Alphatec to be profitable this year. Additionally, the company trades at a high Price / Book multiple of 38.33, which may suggest a premium valuation compared to its tangible assets. Despite these concerns, Alphatec's liquid assets exceed its short-term obligations, indicating a solid liquidity position that can support its operations in the near term.
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