On Tuesday, Neuronetics (NASDAQ:STIM), a medical technology company, experienced a change in stock rating. William Blair adjusted its view from Outperform to Market Perform following the company's second-quarter financial results. The downgrade was prompted by the company's reported sales of $16.5 million, falling short of both the firm's estimate by $2.2 million and the company's own guidance range of $18 million to $19 million.
The reported revenue shortfall was attributed to altered purchasing patterns by accounts affected by the Change Health cyberattack earlier in the year. This incident influenced quarter-end ordering habits as accounts grappled with challenging cash flow situations and prior authorization bottlenecks. Despite the sales miss, Neuronetics observed an 18% growth in utilization of local consumables, a positive sign pointing towards the company's underlying business health.
Customers reported a backlog of patient demand, with motor threshold tests increasing by double digits. These metrics indicate that while Neuronetics faced a tough quarter financially, the demand for its treatments continues to be robust. The company's ability to maintain treatment demand amidst a difficult environment was highlighted as a key takeaway from the quarter's performance.
The downgrade to Market Perform suggests a neutral outlook on the stock, with the firm recognizing the solid treatment demand but also taking into account the financial challenges Neuronetics faced in the second quarter. The change in rating reflects a cautious stance on the stock's near-term prospects, considering the recent financial performance and market conditions that have impacted Neuronetics' operations.
In other recent news, Neuronetics has experienced a dip in second-quarter revenue, reporting a figure of $16.5 million, which fell short of expectations. This decrease was attributed to a decline in treatment session revenue and a cybersecurity breach at Change Healthcare (NASDAQ:CHNG). Despite lower than anticipated results, Neuronetics maintains its full-year 2024 revenue guidance between $78 million and $80 million.
The company is now focusing on its impending merger with Greenbrook TMS, which is expected to generate revenue and cost synergies, pushing Neuronetics towards sustained profitability from 2025. Canaccord Genuity has adjusted its price target for Neuronetics shares to $3.00, while maintaining a Buy rating.
Neuronetics is also investing in its Better Me Guarantee Program and is launching a television advertising campaign in Tampa Bay, Florida, aiming to increase therapy awareness. These are part of the recent developments as the company continues to navigate current challenges, with the goal of achieving positive cash flow in 2025.
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