On Tuesday, Canaccord Genuity adjusted its price target for TELA Bio, Inc. (NASDAQ:TELA) shares, a medical technology company, reducing it to $12.00 from the previous $14.00. The firm maintained its Buy rating on the stock.
The revision follows TELA Bio's second-quarter performance, where it reported an 11% year-over-year revenue growth but fell short of both top- and bottom-line expectations.
TELA Bio encountered several challenges during the quarter, including two cybersecurity attacks, a decrease in procedural volumes, and the loss of three surgeon users due to either death or departure.
Despite these hurdles, the company has reiterated its annual guidance, projecting a 27-31% year-over-year revenue growth, with expectations of a stronger second half, particularly in the fourth quarter.
This optimism is based on the anticipated success of new product launches and initiatives led by the recently appointed Chief Commercial Officer, Greg Firestone.
The company has introduced new products in the United States earlier in the year, including solutions for inguinal hernia and Liquifix, which are expected to expand TELA's reach into high-volume surgical procedures and enhance its robotic surgery capabilities. These new offerings are part of TELA's strategy to navigate down the complexity curve and capture a broader market segment.
Canaccord Genuity remains positive about TELA Bio's prospects, citing the company's robust product portfolio, an experienced sales force, growing Group Purchasing Organization (GPO) implementation, and the momentum from robotic surgery adoption. The firm anticipates TELA Bio to reach a business inflection point soon, as it moves past a significant investment phase.
The expectation is that the company will begin to demonstrate operating leverage, with increased salesforce productivity and GPO penetration, along with the ramp-up of new product launches, contributing to revenue growth while operating expense growth moderates post-investment in new sales representatives.
In summary, Canaccord Genuity reaffirms its bullish stance on TELA Bio, emphasizing the company's attractive valuation, which remains below half the average valuation of its small-cap MedTech peers.
The firm's reiteration of the Buy rating and adjusted price target reflects confidence in TELA Bio's ability to overcome recent challenges and capitalize on its strategic initiatives.
In other recent news, TELA Bio, Inc. reported an 11% increase in its second-quarter revenue for 2024, reaching $16.1 million, despite cybersecurity incidents that negatively affected sales.
The company remains optimistic about strong annual growth and is aiming for profitability in the near future, backed by a positive response to its product portfolio and robust performance in the European market. TELA Bio projects its annual sales to be between $74.5 million and $76.4 million, indicating a growth of 27.5% over 2023.
These developments come in the wake of cybersecurity events at customer hospitals, which impacted revenues by up to $1.75 million. Despite these challenges, the company is focused on expanding its sales force, refining training processes, and improving operational efficiency under the leadership of Greg Firestone.
In terms of future expectations, TELA Bio anticipates 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. The company also expects revenue share payments from the divestiture of NIVIS to contribute an additional $3 million to $7 million over the next eight quarters.
InvestingPro Insights
TELA Bio's recent financial performance and market activity provide a nuanced picture of the company's current position. According to InvestingPro data, TELA Bio has a market capitalization of $98.87 million, indicating a relatively small player within the medical technology sector. The company's significant revenue growth over the last twelve months, at 40.03%, aligns with the optimism expressed by Canaccord Genuity regarding the company's growth prospects. Moreover, TELA Bio's gross profit margin stands at a healthy 69.57%, suggesting that the company retains a substantial portion of its revenue after accounting for the cost of goods sold.
However, the InvestingPro Tips highlight some concerns that investors may consider. The company is quickly burning through cash and analysts have revised their earnings downwards for the upcoming period, which may suggest near-term financial headwinds. Additionally, despite the company's strong revenue growth, analysts do not anticipate TELA Bio will be profitable this year. On a positive note, TELA Bio's liquid assets exceed short-term obligations, which may provide some financial cushion to navigate current challenges. Notably, the stock is also trading near its 52-week low, which could present a potential entry point for investors believing in the company's long-term strategy.
For those interested in a deeper dive into TELA Bio's financial health and prospects, there are additional InvestingPro Tips available. These insights could further inform investment decisions regarding TELA Bio, especially in light of the recent price target adjustment by Canaccord Genuity. With access to a comprehensive set of financial metrics and expert analysis, investors can better gauge whether the current valuation presents an opportunity or a cautionary tale.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.