DIAGNOS is still good for a double, Echelon says

Following first quarter results that missed his expectations, Echelon Capital Markets analyst Stefan Quenneville has kept his “Speculative Buy” rating on DIAGNOS (DIAGNOS Stock Quote, Chart, News, Analysts, Financials TSXV:ADK).

On August 24, ADK reported its Q1, 2024 results. The analyst summarized the quarter.

“FQ124 revenues came in at $43.3K, below our $102.0K estimate and down -70.9% y/y (-36.6% q/q) due to slower-than-expected New Look roll-out. In addition, last year’s revenue included one-time customization consulting fees for the deployment and enhancement of additional AI-based eye exams (such as glaucoma and macular degeneration) that are expected to follow the launch of the diabetic retinopathy diagnostic test. The Company’s FQ124 gross profit of -$173.2K and EBITDA of -$569.4K also came in below our estimates of -$30.6K and -$158.1K, respectively. The net loss came in at -$752.2K in FQ124 versus our -$251.8K estimate. The Company ended FQ124 with $694K of cash and short-term investments, which was helped by net proceeds of $844K from convertible debt and stock warrants issued in FQ124.”

In a research update to clients August 25, Quenneville maintained his “Speculative Buy” rating and one-year price target of $1.00 on DIAGNOS, implying a return of 104 per cent at the time of publication.

Montreal-based Diagnos is a commercial-stage AI company addressing the problem of diabetic retinopathy (DR), the leading cause of adult blindness. The company’s AI-based FLAIRE platform is an equipment-agnostic technology that integrates with existing optometry cameras to enable early detection and monitoring of DR.

The analyst thinks ADK will post EBITDA of negative $1.8-million on revenue of $1.6-million.

“Nevertheless,” Quenneville added, “with ADK remaining the likely winner of the Quebec RFP, which was recently retendered, as well as the potential for a transformational deal with EssilorLuxottica (EL-MIL, NR), we maintain our Top Pick rating and $1.00/shr target price ahead of what we expect to be a catalyst-rich back half of the year.”