Benchmark analyst Bill Sutherland downgraded Omnicell (NASDAQ: OMCL) from Buy to Hold.

The analyst comments "Yesterday, OMCL shocked investors with downwardly revised 2022 expectations that included a 29% drop in 2022 product bookings and implied 4Q22 revenue and non-GAAP EBITDA declines of 7% and 76%, respectively. Nearly the entire problem relates to the XT automated dispensing cabinets (ADCs), which represent over half of total product bookings and, unlike the rest of OMCL’s solution set, provides only limited ROI. As such, it has fallen out of the budgets of some hospitals looking for solutions to enhance revenue and/or margins. Looking forward, our main concerns are 1) the duration of the restrained hospital budgets on XT bookings, and 2) the long-tailed impact of lower 4Q bookings on 1H23 revenue. We are also concerned, though less so, about delayed implementations caused by hospital labor pressures that are chiefly the reason for 4Q’s revenue shortfall. We think until there is a clearer lens into the bookings trend into 2023 (possibly at the 4Q22 earnings report), the stock will likely remain under pressure, and we are reducing our rating to Hold. Longer term, we remain bullish on OMCL’s strategic plan to transition to a model with growing levels of recurring revenue from Advanced Services (SaaS, subs & tech-enabled services) that is expected to generate a ’21-‘25 revenue CAGR of 45% to reach ~25% of total revs and expand margins. We also think it is a uniquely valuable HCIT asset given its dominant market position with sole source relationships with 152 of the 300 largest U.S. health systems, and broad footprint and product set with retail pharmacies (EnlivenHealth)."

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Shares of Omnicell closed at $50.00 yesterday.