Street Overwhelmingly Bullish on Agiliti (AGTI) in New Coverage as Company is 'Uniquely Positioned to Address the Pain Points of Healthcare Providers'

Shares of Agility (NYSE: AGTI) are higher in pre-open trading after numerous Wall Street firms started their coverage of the stock with mostly positive ratings.

At least 8 firms started their coverage with a “Buy” or equivalent rating while UBS analyst Kevin Caliendo is the only one on the sideline so far.

The company made its public debut last month after it opened for trading at $16.05. AGTI previously priced 26,315,789 shares of common stock at a price to the public of $14.00 per share.

Anthony Petrone, an analyst at Jefferies, is bullish on the stock as he believes the company is a “pioneer in medical equipment outsourcing bringing together rental, rapid repair and maintenance services.”

“COVID propelled US hospitals, IDNs, and government agencies to more heavily engage outsourced equipment services paving the way for deeper penetration over the next 5- years. AGTI is best positioned to capitalize on this momentum given its scale and breadth of service offering versus other diversified providers. The underlying US market is currently sized at $14bn annually of which ~$6bn is actively under contract (42% penetrated). We see contracted services penetration expanding to 60% with AGTI's share increasing to ~20% from ~13% over the next several years,” Petrone said in a memo.

The analyst also shared the data from their latest C-suite survey that shows high AGTI site retention while the company is well-positioned for wallet gains. Here are the four key findings from the survey:

1) ~50% of sites deploy multiple AGTI services,

2) medical equipment leasing/mgmt is the most heavily utilized solution,

3) 83% of sites plan to renew AGTI contracts, and

4) 33% plan to add more services over next 1-3 years.

“The data suggests AGTI is well positioned to retain current hospitals sites while growing its share of wallet for outsourced services over the next several years.”

“We used our survey findings to run several hospital share of wallet (SOW) scenarios in order to better size the upside opportunity around contract retention/expansion coming out of the pandemic. Our base case scenario explores upside from 30% of active sites sized 100-500 beds increasing services by $100k while our bull case explores $300k in contract expansions. The exercise shows AGTI is positioned to $60-$180mn of contract expansion upside under modest assumptions over the next 3-years,” comments Petrone, who set a $20.00 per share price target on the stock.

Similarly, Morgan Stanley analyst Drew Ranieri initiated at “Overweight” with a price target of $21.00 per share as AGTI is “uniquely positioned to address the pain points of healthcare providers with its comprehensive outsourcing service offerings, unrivaled footprint, and growing suite of capabilities.”

“Agiliti participates in a large and growing device servicing market that exceeds $10bn in market size. The business has been well insulated throughout COVID-19 and saw a net tailwind (+$30-40mn) due to surge demand that may translate into long-term upside. Shares have traded down ~17% since IPO, driving improved risk reward. Our $21 PT is supported by DCF with a 8% WACC and 2.5% perpetuity growth, and reflects a ~14x2022e Adj. EBITDA, a 2- 2.5x discount to the peer group comprised of a blend of healthcare services and equipment rental companies,” the analyst said in a research note on AGTI.

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