Canaccord Genuity Downgrades InMode Ltd. (INMD) to Hold, 'We were not surprised'

Canaccord Genuity analyst Caitlin Cronin downgraded InMode Ltd. (NASDAQ: INMD) from Buy to Hold with a price target of $22.00 (from $55.00).

The analyst comments "We were not surprised by this result, given our Q3 preview published earlier this week. As a reminder, we had begun to see some chinks in the armor of a steadfast INMD after quarters of management reiterating little economic impacts. At a recent conference, INMD called out financing pressures impacting provider ROI on INMD’s systems while also continuing to highlight challenges/delays to providers securing financing. Another headwind in the Q3 we highlighted was tough comps after a particularly strong Q3/22 and sentiment across MedTech suggesting that Q3 this year likely reflects a return to more normal seasonality. Additionally, INMD pointed out that it is entering a more mature phase in its growth cycle, compounding this seasonality effect. Indeed, these concerns have appeared to flow through to demand, with INMD preliminarily announcing this morning a Q3 miss and lowering its FY guidance by $30M at the midpoint, calling out the effects of more pronounced seasonality as well as financing/leasing approval/loan processing constraints. We do not see these economic headwinds as near term but rather as the beginning of a more subdued appetite for new capital, which, of course, affects potential consumable sales as fewer systems are placed and therefore utilized. Additionally, INMD, with over 80% of its revenues derived from system sales, is particularly exposed to this weaning capital demand. While we do see GLP-1 induced skin tightening and INMD’s expansion into health & wellness as tailwinds to patient demand, we are concerned that worsening provider economics for capital equipment sales will continue to more than offset these tailwinds. While INMD has plenty of cash at its disposal to weather an economic downturn, we remain cautious as to the extent of growth INMD can achieve at this time. As such, we are updating our model for the preliminary results, lowering our growth expectations in the face of these economic headwinds, and downgrading the stock to HOLD. We will readdress the model after the Q3 results."

For an analyst ratings summary and ratings history on InMode Ltd. click here. For more ratings news on InMode Ltd. click here.

Shares of InMode Ltd. closed at $22.40 yesterday.

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