On Wednesday, iRhythm Technologies (NASDAQ:IRTC) stock maintained its Buy rating and $132.00 price target from BTIG. This affirmation comes as iRhythm has started to explore the sleep apnea diagnostics market.
Although the company has only begun to assess the potential in this sector, it is currently conducting a pilot program with a select group of its existing customers, which includes cardiologists and primary care physicians, to understand the diagnostic process better.
The pilot program aims to gather insights into whether these doctors will prescribe a home sleep test (HST), which patients might need one, and how the process of diagnosing obstructive sleep apnea (OSA) could be improved.
It also seeks to determine post-diagnosis management of patient's sleep care. This initiative does not include any of iRhythm's products but rather partners with a third-party independent diagnostic testing facility (IDTF).
During the first-quarter earnings call, iRhythm highlighted its expertise in arrhythmia detection and noted the similarities with the home sleep testing market.
The company also pointed out that a significant portion of its patient base—up to 80% of those with atrial fibrillation—also suffer from OSA, indicating a substantial market opportunity.
While the exploration of the sleep diagnostic market is seen as a potentially exciting new venture for iRhythm, the firm is in the early evaluation stages and does not anticipate meaningful revenue from this for at least a few years. The company's current financial forecast remains unchanged despite the ongoing pilot study.
Reimbursement is another critical factor that iRhythm is considering, as any new test offering will need to meet specific requirements to qualify for insurance coverage.
As the company continues its research into the fragmented home sleep testing market, it looks for opportunities for disruption and considers various possibilities, including partnerships or creating a full-spectrum offering.
InvestingPro Insights
As iRhythm Technologies (NASDAQ:IRTC) ventures into the sleep apnea diagnostics market, its financial health and market performance provide essential context for investors. With a market capitalization of $2.73 billion, the company is navigating a challenging landscape, reflected in its negative P/E ratio of -20.67, indicating investor concerns about profitability. The P/E ratio further adjusted for the last twelve months as of Q1 2024 stands at -25.15, reinforcing these concerns.
Despite a robust revenue growth of 19.35% over the last twelve months as of Q1 2024, iRhythm has not been profitable during this period. This is corroborated by InvestingPro Tips, which suggest that analysts have revised their earnings expectations downwards for the upcoming period and do not anticipate the company to be profitable this year. Moreover, the stock has experienced a significant downtrend over the last month, with a 19.21% drop in price total return.
However, it's not all bleak for iRhythm. The company's liquid assets surpass its short-term obligations, and it operates with a moderate level of debt, which could provide some financial stability as it explores new market opportunities. Additionally, for those interested in further insights, InvestingPro offers more tips for iRhythm Technologies, and by using the coupon code PRONEWS24, investors can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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