This Analyst Thinks Apollo Endosurgery's Valuation 'Does Not Assign Full Value' - Read Why

  • Stephens has reiterated an Overweight rating for Apollo Endosurgery Inc APEN while increasing the price target from $8 to $9.
  • "In our opinion, APEN's valuation does not assign full value to the promising ESS business or targeted opportunities for expanded device utilization and enhanced reimbursement longer term," says Stephens.
  • The revision follows APEN's above consensus 1Q22 revenue growth and reiterates previously established CY22 revenue guidance. 
  • The intragastric balloon (IGB) franchise remains the primary contributor to the betterment of consensus revenue expectations rather than the Endoscopic Suturing System (ESS), writes Stephens.
  • But it also notes that ESS franchise with a planned 50% increase in sales headcount, publication of clinical data, and increased training, ESS-related sales are forecast to accelerate during the 2H and into CY23. 
  • Additionally, the analyst increased loss estimates to reflect APEN's planned sales & marketing and R&D investments throughout CY22. 
  • While CY22 operating results are forecast to demonstrate solid organic growth, CY23 remains the potential inflection year for the APEN story, with organic revenue growth in the mid to upper teens and the potential for gross and operating margin expansion, writes the analyst.
  • Price Action: APEN shares are up 8.70% at $5.50 during the market session on the last check Wednesday.
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