Bernstein Adjusts Price Target on Intuitive Surgical to $655 From $650, Keeps Outperform Rating

With rapid advances in artificial intelligence (AI), the biotech industry may penetrate deeper into many previously unexplored areas of science. Many growing biotech companies are taking full advantage of AI to accomplish this. One such company is the medical device manufacturer Alphatec Holdings , which is now using AI to enhance its innovative spinal surgery solutions.

Alphatec has been in the spotlight thanks to its efforts to revolutionize spinal surgery. Plus, it has demonstrated strong revenue growth and has an innovative product pipeline.

The stock dipped 38.2% in 2024, lagging the S&P 500 Index's gain of 24%. Nonetheless, Wall Street expects the stock to soar to 140% in the next 12 months if it touches its high target price of $22.50. Let’s find out more about this outstanding growth stock.

About Alphatec Holdings Stock

Valued at $1.3 billion, California-based Alphatec Holdings is a small-cap medical technology company that provides a wide range of solutions tailored to spinal disorders. These solutions include implants, biologics, cutting-edge surgical tools, and planning platforms. The company’s mission is to transform the approach to spinal surgery.

Alphatec’s product portfolio includes products used to treat spinal stenosis, compresion fractures, and degenerative disc diseases. It also develops advanced tools to improve surgical outcomes and patient care.

Among its surgical approaches and technologies are anterior cervical discectomy and fusion (ACDF), a procedure to relieve spinal cord or nerve root pressure in the cervical spine; transforaminal lumbar interbody fusion (TLIF), a surgical technique for fusing the lumbar spine bones; prone transpsoas (PTP) and lateral transpsoas (LTP), minimally invasive spinal fusion surgeries.

Thanks to the increasing demand for spinal solutions, the company’s revenue growth has increased consistently. In the third quarter of 2024, ATEC reported significant financial growth, with surgical revenue increasing by 30% and total revenue rising by 27% to $151 million, beating the consensus estimate.

In the quarter, new surgeon adoption stood at 19%, and the company’s procedural volume increased by 20% due to growth in LTP and PTP procedures.

Alphatec is currently not profitable. However, its sole focus on spinal surgery, a rapidly growing market, puts it on track to profitability. Q3 marked ATEC’s second consecutive quarter of positive adjusted EBITDA, which totaled $7.4 million. Its net loss stood at $39.6 million, down from $42.6 million in the same quarter last year.

Green Flags for Alphatec

The medical device market is fiercely competitive, with established players like Intuitive Surgical , Stryker , Globus Medical (GMED, and Medtronic possessing significant resources. Intuitive, in fact, has a dominant position in the robotic surgery market.

Alphatec is expanding its market presence by attracting new surgeons, targeting underpenetrated regions, and improving surgeon training programs. In the quarter, Alphatec trained more than 200 surgeons. Hospitals spend a significant amount of money training surgeons to use these advanced systems and procedures. As a result, high switching costs have given Alphatec a competitive advantage.

In July 2024, the company also introduced EOS Insight, an end-to-end spine surgery platform powered by EOS imaging and AI. This platform combines advanced AI-driven solutions to transform spinal care, providing comprehensive alignment assessments and surgical planning assistance, including the design of patient-specific rods. Management stated that the company has received a record number of orders for EOS year to date, which is why EOS revenue of $65 million is expected for the full year.

The global spine surgery market is expected to grow at a compound rate of 4.9%, reaching $1.49 billion by 2030. Alphatec will see significant growth opportunities due to an aging population, increased demand for robotic surgery procedures, and technological surgical innovation.

The company’s REMI Robotic Navigation System and Calibrate LTX lateral expandable implant system, launched last year, could further help boost the company’s revenue. Alphatec invests heavily in research and development (R&D) to enhance its product pipeline. In the quarter, the company spent $13 million on R&D.

Alphatec increased its term loan capacity by $50 million this quarter. At the end of Q3, cash and cash equivalents totaled $80.9 million. The company’s decision to increase its term loan capacity by $50 million provides additional funds to support strategic initiatives such as R&D and acquisitions. ATEC expects to be free cash flow positive by the second quarter of 2025.

Management stated that the company is on track to meet its long-term revenue target of $1 billion by 2027, with an adjusted EBITDA of $180 million. If Alphatec’s revenue continues to grow at this rate, profitability is within reach. The company updated its revenue guidance, which is now expected to be around $605 million. This includes $540 million in surgical revenue and $65 million in EOS revenue. Positive adjusted EBITDA could be around $27 million, compared to a previous estimate of $22 million for the full year 2024.

Analysts predict Alphatec’s revenue will increase by 25.4% to $605.1 million in 2024, in line with management’s new guidance. Analysts expect revenue to further increase by 20.6% in 2025, while losses will fall to $0.66 per share.

Since Alphatec is not profitable yet, we will look at its price-sales ratio for valuation. Trading at 1.8x forward 2025 projected sales, ATEC stock seems like an affordable, growing biotech stock with high potential in the spine surgery market.

What Does Wall Street Say About ATEC Stock?

Despite the stock’s decline last year, analysts have generally maintained positive ratings for Alphatec stock. Recently, Canaccord Genuity and Barclays analysts recently reiterated their “Buy” recommendation for the stock, citing its strong financial performance, innovative product lineup, and growth potential.

On the other hand, Morgan Stanley analyst Kallum Titchmarsh maintained a neutral stance on the stock, advising investors not to buy or sell it right now. The analyst suggests closely monitoring the company’s progress to assess if its performance matches its projected targets for the coming years.

Overall, Wall Street is strongly bullish about Alphatec stock. Of the 12 analysts covering ATEC, 10 have rated it a “Strong Buy,” one recommends a “Moderate Buy,” and one rates it a “Hold.” Its mean price target of $17.29 suggests the stock can climb as high as 84.5% from current levels. Furthermore, its high target price of $22.5 implies potential upside of 140.1% in the next 12 months.

The Bottom Line on ATEC Stock

The global medical devices market is estimated to reach $957.3 billion by 2030, at a compound annual growth rate of 6.5%. Alphatec’s surgeon-centric innovation, strong financial performance, and strategic growth initiatives have positioned it as a market leader in spine surgery. While profitability challenges persist, the company’s proactive approach to dealing with these headwinds and capitalizing on market opportunities positions it for long-term growth.

For investors with a high risk appetite and longer investment horizon, Alphatec’s stock offers a blend of growth and resilience at a cheaper price.

On the date of publication, Sushree Mohanty did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

• 1 ‘Strong Buy’-Rated Growth Stock Wall Street Expects to Soar 140%
• Is Unity Software Stock a Buy, Sell, or Hold on Roaring Kitty Rally?
• Nvidia Stock Warning? This Hedge Fund Manager Thinks NVDA Will Fall to $50 in 2025
• Build a Bulletproof Portfolio with These Three Diversified Dividend Stocks

Intuitive Surgical, Inc. , headquartered in Sunnyvale, California, develops, manufactures, and markets innovative solutions aimed at enhancing the quality and accessibility to minimal invasive care. Valued at $190.7 billion by market cap, the company offers robot-assisted, the da Vinci Surgical System enabling minimally-invasive surgery, and the Ion endoluminal system, designed for biopsies. The leading medical technology company is expected to announce its fiscal fourth-quarter earnings for 2024 on Thursday, Jan. 23.

Ahead of the event, analysts expect ISRG to report a profit of $1.40 per share on a diluted basis, up 18.6% from $1.18 per share in the year-ago quarter. The company beat or matched Wall Street’s EPS estimates in its last four quarterly reports.

For the full year, analysts expect ISRG to report EPS of $5.45, up 34.6% from $4.05 in fiscal 2023. Its EPS is expected to rise 15.4% year over year to $6.29 in fiscal 2025.

ISRG stock has outperformed the S&P 500’s ($SPX) 27.2% gains over the past 52 weeks, with shares up 68.2% during this period. Similarly, it outperformed the Health Care Select Sector SPDR Fund’s (XLV)marginal losses over the same time frame.

ISRG’s strong performance is driven by the growth and demand of its fifth-generation da Vinci system, featuring innovations like Force Feedback technology that leads to less trauma and quicker recovery. Additionally, favorable market conditions and the integration of AI and machine learning, like its AI-powered simulator SimNow and consulting services for optimization of operating room scheduling have improved surgical outcomes, bolstering its success.

On Oct. 17, ISRG reported its Q3 results and its shares closed up by 10% in the following trading session. Its adjusted EPS of $1.84 surpassed Wall Street expectations of $1.64. The company’s revenue was $2.04 billion, beating Wall Street forecasts of $2.01 billion.

Analysts’ consensus opinion on ISRG stock is moderately bullish, with a “Moderate Buy” rating overall. Out of 26 analysts covering the stock, 17 advise a “Strong Buy” rating, two suggest a “Moderate Buy,” and seven give a “Hold.” ISRG's average analyst price target is $576.33, indicating a potential upside of 6.3% from the current levels.

On the date of publication, Neha Panjwani did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policyhere.

• Build a Bulletproof Portfolio with These Three Diversified Dividend Stocks
• These 3 Companies Are Funding Trump’s Inauguration. They Could Get a Boost in the New Year.
• Low IV Alert: Stocks to Watch Right Now
• Stock Index Futures Steady With Focus on U.S. JOLTs Report and Fed Speak