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Senseonics Holdings: Analysts Expect 79% Upside Despite Unprofitability
Stock Analysis & Ideas

Senseonics Holdings: Analysts Expect 79% Upside Despite Unprofitability

Senseonics Holdings, Inc. (SENS) is an innovative medical technology company. It is involved in the design, manufacturing, and commercialization of groundbreaking implantable glucose monitoring products designed to help people with diabetes live a care-free life.

I am neutral on Senseonics Holdings as its strong growth potential and generally bullish outlook from Wall Street analysts are offset by its lack of profitability. (See Analysts’ Top Stocks on TipRanks)

Strengths

Senseonics’ continuous glucose monitoring systems, Eversense and Eversense XL, are equipped with a tiny sensor that is inserted under the skin and communicated with a smart transmitter that is worn over the sensor. The person’s glucose data is sent every five minutes to the Senseonics’ mobile app downloaded on the customer’s smartphone.

The company has applied for the review of its Eversense 180-day PMA supplement by the FDA. It has also presented clinical data on the accuracy and safety of Eversense at various conferences, including the European Association for the Study of Diabetes Annual Meeting and the Association of Diabetes Care & Education Specialists Annual Conference.

Over the past year, Senseonics has experienced an almost 600% rise in its shares.

Recent Results

Senseonics Holdings Inc. has posted better than expected third-quarter 2021 results. The company reported total revenue of $3.5 million, beating consensus estimates. This is compared to the $0.8 million revenue it generated in the third quarter of 2020.

This improvement was primarily attributed to the transition of commercial responsibility to Ascensia and its distribution orders in the United States and the EU. Revenue generated in the U.S. totaled $0.6 million, and international revenue totaled $2.9 million.

The company’s Q3 2021 saw a gross loss of $1.2 million, which declined by $2.1 million on a year-over-year basis. Its sales and marketing expenses saw a decrease of $0.7 million year-over-year and reached $2.5 million, attributed to a decline in salary and personnel costs because of its reduction in sales support after Eversense commercial efforts were transferred to Ascensia.

This change was partially offset by an increase in general advertising expenses associated with shared commercialization support of the GMS in the U.S.

Research and development expenses in the third quarter saw a year-over-year increase of $2.6 million to $7.2 million due to higher salary and associated expenses from expanding the R&D workforce, an increase in lab supplies and clinical studies, and contractor expenses.

Senseonics posted a net income of $42.9 million or earnings of $0.10 per share in the third quarter of 2021 compared to a net loss of $23.4 million in the third quarter of 2020.

For the quarter ended September 30, 2021, the company posted cash, cash equivalents, and investments of $201.1 million, partially offset by outstanding debt of $109.1 million.

The company expects its full-year 2021 net revenue to be between $12 million and $15 million. 

Valuation Metrics

SENS stock is challenging to value right now because it is not generating any consistent profits, and it is a high-multiple high-growth company.

For example, its forward EV/sales is 46.4 times, but it is expected to grow revenues in 2022 by 126.2%. That said, the company is still expected to be running steep losses in 2022 with no path to profitability in the near future.

Wall Street’s Take

Turning to Wall Street, SENS earns a Moderate Buy consensus rating based on two Buys and one Hold rating assigned in the past three months. Additionally, the average Senseonics price target of $5.00 puts the upside potential at 79.2%.

Summary and Conclusion

SENS is a high-multiple high-growth company that offers investors massive upside potential if it can live up to the consensus price target laid out for by Wall Street analysts. Additionally, the growth rates are so large that they make the company’s relatively high enterprise-value-to-sales multiple seem quite reasonable.

On the other hand, the company is nowhere near profitable, and with interest rates rising, high-growth companies like this one are bound to face some headwinds from the market. As a result, investors might want to be careful and wait for a pullback for adding shares.

Disclosure: At the time of publication, Samuel Smith did not have a position in any of the securities mentioned in this article.

Disclaimer: The information contained in this article represents the views and opinion of the writer only, and not the views or opinion of TipRanks or its affiliates  Read full disclaimer >

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