Butterfly Network (BFLY), a developer of ultrasound imaging solutions, is revolutionizing medical imaging technology with products that offer whole-body imaging capabilities in one handheld probe, making it accessible for any hospital computer system, smartphone, or tablet. The company’s recent strategic highlights include ROI validation through a case study with the University of Rochester Medical Center, international market expansion, and advancements in veterinary care. Moreover, the company beat top-and-bottom-line expectations for Q3 2024, and the stock is up over 142% year-to-date, making it a compelling option for GARP-oriented investors.
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Butterfly Generating Positive Attention
Butterfly Network specializes in developing, manufacturing, and marketing ultrasound imaging solutions. Its products include the Butterfly iQ, a handheld whole-body ultrasound system; the Butterfly iQ+ and iQ3 ultrasound devices, integrated with clinical workflow and available on multiple platforms; and the Butterfly iQ+ Vet, a handheld ultrasound specifically for veterinarians.
Butterfly’s products have generated recent positive attention, both in terms of financial performance and patient care. This was reflected in a case study involving the University of Rochester Medical Center and research by Dr. Stephen Erickson, which highlighted the underlying potential for ROI. Meanwhile, educational initiatives included Kansas City University’s implementation of Butterfly ScanLab for its POCUS curriculum.
The company’s footprint broadened with the release of Butterfly iQ3 in Europe, alongside new markets opening in Indonesia, the Netherlands, and Belgium. Butterfly’s value extends to the veterinary sector, as demonstrated by Kansas State University’s research into bovine respiratory disease management. Additionally, the Butterfly portfolio grew with two new partners, one of which, HeartFocus by Deski, recently launched an AI-powered cardiac training app.
Looking forward, Butterfly will kick off a pilot for its new HomeCare, focusing on virtual chronic care management. The business also plans to boost access to capital with a new subsidiary, Octiv, to leverage the Butterfly chip in new sectors. Lastly, there were notable developments regarding the EU’s Restriction of Hazardous Substances. Butterfly’s revocation request received substantial backing from the European Commission, leading to a re-submission of the request.
Butterfly Network’s Financials & Outlook
The company recently announced results for Q3 2024, highlighting a significant increase in revenue and a reduction in losses. Total revenue was $20.6 million, up 33% year-over-year, beating analysts’ expectations. This growth was primarily driven by the higher selling price of the recently launched iQ3 probe. Product revenue saw a 55% surge, reaching $13.5 million, thanks to a 37% increase in units fulfilled year-over-year and the iQ3’s higher selling price. Software and other services comprised 34% of the total revenue and increased by 5% to $7.0 million.
The gross profit was $12.2 million, compared to $9.4 million in the previous year, and the adjusted gross profit increased to $12.3 million. However, the gross margin slightly decreased due to higher manufacturing costs.
The company reduced operating expenses by 30% to $29.5 million, owing to previously announced workforce reductions and non-payroll spending rationalization. The net loss decreased to $16.9 million from $27.4 million in Q3 2023. Adjusted EBITDA loss and adjusted earnings per share (EPS) of -$0.05 beat consensus expectations by $0.03.
As of the quarter’s end, the company held cash, cash equivalents, and restricted cash worth $97.8 million.
In the aftermath of Q3, BFLY’s management has raised forward guidance for FY 2024. Revenue is projected to grow by over 20%, between $79 million and $81 million. Moreover, the company has elevated its adjusted EBITDA guidance by slashing the predicted loss by $5 million, bringing the new anticipated loss to between $42 million and $40 million.
What Is the Price Target for BFLY Stock?
The stock has been on a volatile (beta of 2.47) upward climb, increasing its price by over 198% in the past year. It trades at the high end of its 52-week price range of $0.67 – $2.75 and demonstrates ongoing positive price momentum as it trades above the 20-day (1.95) and 50-day (1.73) moving averages. With a P/S ratio of 7.1x, it appears to be richly valued compared to the Medical Devices industry average of 4.2x.
Analysts following the company have been constructive on BFLY stock. Based on the most recent recommendations of two analysts, Butterfly Network is rated a Moderate Buy. The average price target for BFLY stock is $3.00, representing a potential upside of 14.50% from current levels.
Bottom Line on BFLY
Butterfly Network is gaining traction in medical imaging technology, offering groundbreaking products that allow comprehensive body imaging with a handheld probe. Its strategic and financial performance, including successful ROI case studies, expansion into international markets, penetration into veterinary care, and positive Q3 2024 results, positions it as an intriguing investment option. With its upward stock trajectory and projections of potential upside, Butterfly Network is a compelling GARP option for investors interested in health technology.
