PINK stock has price target cut at Paradigm Capital

A ramp up that appears to be happening slower than he expected has Paradigm Capital analyst Scott McCauley lowering his price target on Perimeter Medical Imaging (Perimeter Medical Imaging Stock Quote, Chart, News, Analysts, Financials TSXV:PINK).

In a research update to clients June 25, McAuley maintained his “Speculative Buy” rating on PINK but lowered his price target on the stock from $2.50 to $1.50, implying a return of 257% at the time of publication, including dividend.

The analyst reviewed his bullish investment thesis on PINK.

“About 20% of the 200,000 lumpectomies each year in the U.S. need a second surgery because the surgeon missed some of the cancer, costing about US$650M per year,” he wrote. “PINK’s FDA-cleared S-Series device can quickly image the tumor to determine if the surgeon needs to remove more tissue before the procedure is completed. With recurring revenue from a disposable per-use element, an experienced team, and upside opportunities from expansion beyond breast cancer, we see PINK as a medical device growth opportunity.”

But McAuley warns the adoption of the S-Series likely isn’t going to happen as quickly as he first imagined.

“Three S-Series systems were installed in Q1 for a total of 12 current commercial systems,” he noted. “Two of the three were at a national healthcare system that we assume is HCA Healthcare (HCA-US, NR) and brings the total installation base at HCA to six. We continue to see this as positive since, as a for-profit system, it evaluates both the financial and medical value of any new products. It also provides an opportunity to expand across the 185 hospitals managed by HCA, including 56 in Texas alone. However, we had previously estimated that the company would have 28 systems installed by the end of 2024, which we now see as too aggressive. Given the slower pace of installations and the potential B-Series approval not until late 2025 or early 2026, we have adjusted our ramp-up estimates.”

As his new target implies, the analyst says he still sees a lot of value in PINK.

“The updates to our installation ramp-up result in our new C$1.50 target price (was C$2.50), using a DCF of our rollout assumptions with a 11% WACC and 5% terminal growth rate,” he added. “We could see the balance sheet as a near-term overhang, but with the stock down 68% YTD and trading at 2.8x our 2025 revenue estimates (North American small cap MedTech average is 4.0x), we see value at these levels. We maintain our Speculative Buy rating.”