In February, medical device manufacturer Nanox Imaging (NASDAQ:NNOX) saw its stock price double thanks to Nvidia’s (NASDAQ:NVDA) investment disclosure. Since then, the stock has fallen 34% from the February high. However, it is still up 31% year-to-date due to the company’s progress in bringing its new technology to market. The company is making progress but still has a way to ramp up production at scale and achieve the levels of profitability necessary to warrant the current stock price.
Investors willing to pay a premium for a growth-oriented medical device company with novel technology may find this a compelling opportunity.
Nanox Ecosystem
Nanox is a medical device company that has innovated a digital X-ray source that is projected to significantly reduce the cost of imaging systems. The company is strategizing the deployment of these systems, with a primary objective to promote early detection and preventive healthcare.
Its ecosystem consists of multiple components. Nanox.ARC is a multi-source Digital Tomosynthesis system providing cost-effectiveness and easy usability. Nanox.AI is an AI-enhanced suite of algorithms designed to enhance the interpretation of routine CT imaging, thereby showcasing early signs typically associated with chronic diseases.
Additionally, Nanox’s cloud-based technology, Nanox.CLOUD, along with its decentralized marketplace managed by its subsidiary, USARAD Holdings, offers remote access to experts in radiology and cardiology.
Lastly, Nanox.MARKETPLACE is a comprehensive platform offering teleradiology services that form an integral part of the ecosystem. The teleradiology market is experiencing solid growth, with projections indicating a potential market worth of $10.1 Billion by 2033, a compound annual growth rate (CAGR) of 13.2% from 2024 to 2033.
Nanox’s Recent Financial Results & Outlook
Nanox recently released its Q1 2024 financial report. Revenue was $2.56 million, a 4.5% year-over-year increase. However, the revenue fell short by $1.86 million compared to expectations. The revenue during the first quarter was generated primarily through teleradiology services, the sales and deployment of imaging systems, and the sale of AI solutions, a 0.2 million increase from the $2.4 million reported in the previous year’s comparable period.
For the quarter, the company experienced a net loss of $12.2 million, a slight increase from the net loss of $11.8 million in the same period last year. However, non-GAAP EPS of -$0.21 beat expectations of -$0.26.
Concerning liquidity and capital resources, the company had $73.3 million in cash, cash equivalents, restricted deposits, and marketable securities as of the end of the first quarter. This was a decrease of $9.5 million from the $82.8 million reported as of December 2023, mainly attributed to negative cash flow from operations amounting to $9.4 million.
Is NNOX Stock a Buy?
Overall, Nanox is rated a Moderate Buy based on the recommendations and price targets assigned over the past three months by the two analysts following the company. The average price target for NNOX stock is $16.00, representing an upside of 90.70% from current levels.
The stock has been highly volatile, with the recent trend moving downward, as the stock has shed over 50% in the past year. It sits towards the low end of its 52-week price target of $4.89-$22.69 and continues to demonstrate negative price momentum, trading below its 20-day (9.32) and 50-day (9.37) moving averages.
Shares are relatively richly valued. The TTM P/S ratio of 47.23x trades well above the Medical Device industry average of 4.05x, as does the FWD P/S ratio of 19.98x vs. the industry average of 3.6x. Earnings will ultimately validate the price level, and while profitability has risen appreciably, the gross profit margin of -66.55% is still a long way from the Healthcare sector median of 56.73%.
Conclusion on NNOX
Nanox is making progress in bringing its novel technology and radiology ecosystem to market and is well positioned for system and software expansion. However, it has a way to go before reaching scale and sufficient profitability. Given the stock’s rich valuation, investors may want to hold off and revisit once the company has made more progress in growing its financial results.
