The InMode (NASDAQ:INMD) stock crash today is enough to send shivers down the spine of any investor. Yet, there’s a value play here for anyone willing to accept some risk. I am bullish on INMD stock because InMode already announced disappointing revenue guidance, so the upcoming quarterly data release might not be as bad as the market seems to fear it will be.
Israel-based InMode offers medical products for procedures such as liposuction, skin tightening, body and face contouring, and skin rejuvenation treatments. Being based in Israel is problematic right now, of course, but InMode is managing surprisingly well, given the circumstances.
There’s a great deal of pessimism surrounding InMode, but as the old saying goes, volatility brings opportunity. When the storm passes, don’t be surprised if the direction shifts from crash mode to rally mode for InMode.
InMode Addresses Concerns About Geopolitical Turmoil
Some financial traders might choose not to invest in InMode because the company is headquartered in Israel, and they’re worried about what’s happening with the war there. These concerns are understandable, and what’s taking place in that region is tragic and worrisome.
Thankfully, InMode issued a press release assuring the company’s stakeholders that the company’s workers are safe. However, stock traders will also wonder whether InMode’s ability to deliver its products will be disrupted by the war in Israel.
InMode Chairman and CEO Moshe Mizrahy addressed this concern, stating, “The contribution of revenues generated from Israel is less than 1%.” Concerning the workers in the region, Mizrahy reported that InMode’s “Israeli employees are resilient and experienced in working during challenging times.”
Furthermore, it sounds as if InMode’s operations won’t be substantially impacted in a negative way. Mizrahy doesn’t “anticipate any interruption to production” and observes that InMode’s “inventory levels globally and in Israel are sufficient and include components and subassemblies for the next three quarters.” Hence, the CEO promises that “all platforms and consumables will be delivered on time and will meet the highest standards.”
InMode Prepares Investors for Q3 and Full-Year Challenges
Nonetheless, it isn’t the turmoil in the Middle East that caused INMD stock to crash by over 20% today. Rather, the negative catalyst is InMode’s management’s admission that the company will see soft results in this year’s third quarter.
InMode has a consistent track record of quarterly EPS beats. However, Q3 of 2023 might not be a winner for InMode. The company is expected to release its quarterly data on October 25.
Yet, InMode went ahead and published its preliminary results and guidance this morning. Evidently, the market didn’t like what they heard from the company. Specifically, InMode anticipates Q3-2023 revenue of $122.8 million to $123.0 million (versus expectations near $137 million) and non-GAAP earnings per diluted share of $0.59 to $0.60 (versus the $0.67 that Wall Street had called for).
Moreover, for the full year of 2023, InMode expects to generate revenue of $500 million to $510 million. The company’s previous guidance called for revenue between $530 million and $540 million.
Now, stock traders have vented all of their frustration and disappointment at InMode by dumping their shares ahead of the firm’s final Q3-2023 earnings report. I suspect that the actual data and final guidance won’t be any worse than what was published in the preliminary report. Besides, value hunters should be interested in this still-profitable company that’s trading at about 10 times its GAAP-measured trailing 12-month earnings. For reference, the sector median P/E ratio of 27.7x is almost triple InMode’s P/E ratio.
Is INMD Stock a Buy, According to Analysts?
On TipRanks, INMD comes in as a Strong Buy based on five unanimous Buy ratings assigned by analysts in the past three months. The average InMode price target is $55.40, implying 157.7% upside potential.
If you’re wondering which analyst you should follow if you want to buy and sell INMD stock, the most profitable analyst covering the stock (on a one-year timeframe) is Matthew Taylor of Jefferies, with an average return of 122.46% per rating and a 64% success rate. Click on the image below to learn more.
Conclusion: Should You Consider INMD Stock?
The market reacted harshly to InMode’s preliminary third-quarter results and outlook today. However, this could provide a setup for a relief rally, as the market is now prepared for a worst-case scenario, and InMode’s upcoming quarterly report won’t likely be any worse than what stock traders already expect.
Additionally, it’s comforting to know that InMode’s workers are currently safe and that the company’s production capacity hasn’t been substantially disrupted. Therefore, if you appreciate good value and you can tolerate some volatility and risk, I believe INMD stock is worth considering.
