Shares in medical tech stock Zynex (ZYXI) plunged 23% in Monday’s trading after the company revealed lower-than-expected orders for the second and third quarter due to the fallout from Covid-19. However shares rose 3% in after-hours trading.
As a result, ZYXI updated its previous revenue estimate for the third quarter of 2020 to between $20.0 and $20.5 million compared to the previous estimate of between $22.3 and $22.8 million. Third quarter Adjusted EBITDA is in-line with the previous estimate and is expected to come in between $2.3 and $2.8 million.
Thomas Sandgaard, CEO of Zynex said: “Similar to most companies we have seen the impact of the COVID-19 pandemic, not only on the availability of physicians to prescribe our products but also on navigating employee and supply chain issues. Our order growth during this pandemic has been encouraging with 96% growth year over year and 87% sequentially but was slightly lower than what we originally projected for Q3.”
Zynex’s full year 2020 revenue estimate now falls between $80 and $81 million, at the lower end of the previously announced range of $80 to $85 million. Meanwhile the revenue estimate is approximately 76% to 78% above last year’s full year revenue of $45.5 million.
According to the company, 2020 full year estimated adjusted EBITDA will be $12.5 to $13.5 million. It says that the decrease for the full year versus the prior estimate of $15 to $18 million is primarily related to the accelerated hiring of sales reps which was aided by the increased number of available candidates related to COVID-19.
“The acceleration of sales rep hiring is a positive for our future but with the effects of COVID-19 on our revenue, there is a near-term effect on profitability” the company stated. Indeed, Zynex expects to have 500 sales reps in the US by the end of 2020 and over 600 by the end of 2021 (up from 400 sales reps in early September).
Shares in Zynex have exploded by over 90% year-to-date, and the stock scores a bullish Strong Buy Street consensus. That’s with four back-to-back buy ratings. Meanwhile the average analyst price target stands at $26 (74% upside potential).
Following the news Piper Sandler analyst Matt O’Brien reiterated his ZYXI buy rating and $30 price target (97% upside potential).
He called the results a “near-term bump in the road”, arguing that the long-term Zynex picture continues to look compelling. In particular he sees the aggressive sales rep hiring as a notable positive- and advises investors to use weakness as a buying opportunity. (See ZYXI stock analysis on TipRanks)
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