On Tuesday, Neuronetics (NASDAQ:STIM) stock, received an upgrade from Market Perform to Outperform by an analyst at William Blair.
The upgrade comes on the heels of the company's NeuroStar system receiving an expanded indication for treating adolescents, which is anticipated to bolster the company's growth.
The analyst highlighted the significance of NeuroStar's broader application in adolescents as a key factor that could enhance the company's growth trajectory. This expansion is expected to increase both awareness and insurance coverage in the subsequent quarters.
Additionally, the company's efforts to improve the recognition and usage of Transcranial Magnetic Stimulation (TMS) technology among psychiatrists and patients have been noted as potentially driving double-digit growth.
Despite facing challenges from competitors like Greenbrook, the situation seems to be improving. Moreover, while issues with Change Healthcare (NASDAQ:CHNG) present a new challenge, they are considered manageable.
The analyst expressed confidence in the company's strategic initiatives, which have been performing better than initially anticipated, to steer the company back towards sustained growth.
This is particularly relevant for Neuronetics' business model, which operates similarly to a razor/razorblade model, where ongoing sales of consumables follow the initial equipment sale.
The analyst's positive outlook is also reflected in the valuation of Neuronetics' shares, which are currently trading at 1.1 times the firm's 2024 sales estimate of $78.7 million.
This valuation, coupled with the recent developments and strategic initiatives, has led to the stock receiving an Outperform rating, indicating a favorable view of its investment potential.
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