On Tuesday, Piper Sandler adjusted its stance on Avita Medical Ltd . (NASDAQ:RCEL), downgrading the stock from Overweight to Neutral and significantly reducing the price target to $9.00 from the previous $21.00.
The firm cited several concerns following the company's first-quarter earnings report for fiscal year 2024, which aligned with the figures provided in their April update. Avita Medical anticipates its full-year 2024 revenue to be at the lower end of the previously forecasted range between $78.5 million and $84.5 million, representing a growth of 57% to 69%.
For the second quarter of fiscal year 2024, Avita projects revenue to be between $14.3 million and $15.3 million, which is slightly below the target set by Piper Sandler. The analyst expressed skepticism about the company's ability to meet its full-year guidance, noting that they expect revenues to fall short of the management's lowest estimate.
The recent departure of Avita's Vice President of Sales was also highlighted as a potential issue, as it could disrupt the sales force's focus and productivity, thereby impacting the company's sales performance.
Additionally, the company has seen a significant increase in operating expenses (OPEX), raising the possibility of another equity raise to fund operations. Although Avita has a credit facility in place, the combination of these factors has led to an elevated risk profile for the stock.
The analyst concluded by acknowledging the merit of Avita's technology but indicated that the current challenges have prompted a more cautious view, leading to the adjustment in the price target.
InvestingPro Insights
In light of Piper Sandler's recent downgrade of Avita Medical Ltd. (NASDAQ:RCEL), real-time data and insights from InvestingPro can provide additional context for investors. The company's market capitalization stands at $215.43 million, which is significant for investors assessing the company's size and market presence. Despite the challenges highlighted by Piper Sandler, Avita Medical holds more cash than debt on its balance sheet, which is a positive sign of financial stability and is one of the InvestingPro Tips that might reassure investors about the company's ability to manage its finances in the short term.
Another key InvestingPro Tip points out that the stock's Relative Strength Index (RSI) suggests it is currently in oversold territory, indicating that the stock could be undervalued and may present a buying opportunity for contrarian investors.
InvestingPro data also reveals that Avita Medical's revenue has grown by 45.68% over the last twelve months as of Q4 2023, showcasing the company's ability to expand its sales despite the operational concerns raised. However, it's also important to note that the company is not expected to be profitable this year, and the stock has taken a significant hit over the last week, month, and three months, reflecting investor sentiment and market reactions to recent developments.
For investors looking for more in-depth analysis and additional tips, there are over 10 InvestingPro Tips available at https://www.investing.com/pro/RCEL. These insights could be crucial for making informed decisions, especially in the context of the company's recent performance and analyst expectations. Remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro, where the full spectrum of financial metrics and expert insights can help navigate the complexities of investing in Avita Medical.
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