©Reuters.
On Tuesday, Stifel downgraded shares of Sonendo Inc. (NYSE:SONX) from “buy” to “hold” and significantly lowered the price target from $1.00 to $0.25. This adjustment came despite the company's fourth-quarter results meeting revenue expectations and reporting a slightly higher-than-expected EBIT loss.
The main concern for the downgrade is Sonendo's 2024 revenue outlook, which is expected to be between $28 million and $30 million, a figure that is higher than Stifel's prior expectations, even taking into account the recent sale of TDO Software. This is significantly lower than the current figure of $38 million.
Stifel analysts stated that the downgrade was not a reaction to the company's fourth-quarter 2023 results, but rather because the outlook for 2024 fell short of expectations. This outlook suggests a significant year-over-year decline in sales, leading management to reconsider its sales strategy.
The analyst noted that there were initially hopes that new direct sales organization (DSO) partnerships and a revamped sales strategy would accelerate console sales. However, the latest guidance shows sales will be down 34% year over year.
Sonendo's Performance Indicator (PI) also appears to be a cause for concern, with estimates showing a continued decline in utilization, which is expected to decline by a mid-teens percentage. This indicator is considered important for a company's performance.
Stifel analysts acknowledged that the current stock price is low, but expressed a desire to observe from the sidelines how the company's capital sales proceed. There is also interest in whether the introduction of new billing codes for PIs will increase utilization over the long term, with payments likely to increase by $40 to $60 starting in 2025.
This article was generated with the help of AI and reviewed by an editor. Please see our Terms of Use for more information.
