On Thursday, RBC Capital downgraded Outset Medical Inc. (NASDAQ:OM) stock from Outperform to Sector Perform, slashing the price target to $3.00 from the previous $6.00.
The firm’s decision follows Outset Medical’s second-quarter results for 2024, which fell short of market expectations, prompting the company to revise its revenue guidance downwards.
The medical technology company reported that its revenue guidance for the year 2024 has been adjusted to approximately $110 million, a decrease of 15.6% year-over-year, from the previously forecasted range of $145-153 million, which would have represented an increase of 12-18% year-over-year. This revision comes in the wake of the company’s latest quarterly performance, which did not meet consensus estimates.
RBC Capital noted that operational execution at Outset Medical remains a challenge, as evidenced by the company’s recent quarterly results. Despite the approval of Tablo Cart, a key product for the company, Outset Medical’s second quarter was yet another disappointment.
The company is currently undergoing a commercial transformation aimed at driving conversions and securing larger deals. However, this strategic shift is resulting in an extended sales cycle.
Furthermore, Outset Medical has chosen not to reiterate its long-range planning (LRP) targets. The lack of clarity on execution and future visibility has led RBC Capital to adjust its outlook on the company’s stock performance, resulting in the revised Sector Perform rating and a lower price target.
The analyst’s comments underscore the uncertainty surrounding the company’s ability to meet its operational goals and manage the extended sales process effectively.
In other recent news, Outset Medical reported a first quarter revenue of $28.2 million, falling short of expectations due to the TabloCart ship hold and a cyberattack. The company, however, remains optimistic about meeting its annual guidance following a rebound in treatment ordering.
Outset Medical also announced a significant restructuring plan aimed at reducing cash use by over $100 million through 2027, with the goal of achieving cash flow breakeven sooner than anticipated, without additional capital.
The company continues to focus on its recurring revenue model and expansion in the acute, home, and subacute markets. Gross margin improved to 31.1%, and operating expenses decreased. A positive outlook for annual revenue growth in the high-teens between 2025 and 2027 was also stated….
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