Thursday, UBS adjusted its stance on Treace Medical Concepts Inc (NASDAQ:TMCI) stock, shifting from a Buy to a Neutral rating. The firm also significantly lowered the price target to $6.50 from the previous $16.00.
The move comes as Treace Medical, known primarily for its Lapiplasty product, encounters increased competition within the bunion correction market.
The UBS report highlighted concerns about the company's ability to continue its market penetration and maintain its market share with the emergence of new competitors.
The forecast for Treace Medical's growth in fiscal year 2024 has been revised to low double digits, a reduction from the earlier estimate of approximately 20%. This revision reflects the challenges Treace Medical faces in securing its position in the market.
The firm also provided projections for the company's sales over a five-year span, anticipating a compound annual growth rate (CAGR) of about 10% from 2023 to 2028.
This expectation is based on the assumption that the volume of sales will grow at a high single-digit rate and the average selling price (ASP) will see a low single-digit increase.
Despite the downgrade, UBS sees the current trading value of Treace Medical's stock, which is less than two times its enterprise value to sales (EV/Sales), as offering a balanced risk/reward scenario in the near term.
The report acknowledges that while there is potential for sales to rebound to previous growth levels, the current market conditions and competitive landscape justify the revised rating and price target.
InvestingPro Insights
In light of UBS's recent neutral stance on Treace Medical Concepts Inc (NASDAQ:TMCI), the InvestingPro data and tips provide further context that may be valuable for investors. The company's market capitalization stands at $368.83 million, indicating its size within the sector. Despite the challenges outlined by UBS, TMCI has shown significant return over the last week with a 34.31% price total return, which could capture the interest of momentum investors. Additionally, the stock's high price volatility might appeal to traders looking for short-term opportunities.
InvestingPro Tips suggest that TMCI holds more cash than debt on its balance sheet, which could be a sign of financial stability, and its liquid assets exceed short-term obligations, indicating the company has a buffer to meet its immediate financial needs. However, analysts are not optimistic about the company's profitability in the near term, which aligns with UBS's cautious outlook.
For investors seeking a more comprehensive analysis, there are additional InvestingPro Tips available that delve deeper into Treace Medical's financial health and market performance. To explore these insights further, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.