Profound Medical keeps “Strong Buy” rating at Raymond James

Following a big financing, Raymond James analyst Michael W. Freeman has cut his price target, but still thinks Profound Medical Corp. (Profound Medical Corp. Stock Quote, Chart, News, Analysts, Financials TSX:PRN) is undervalued.

On December 10, PRN announced it had closed a (YS) $40.25-million financing, funds earmarked to develop and commercialize its Tulsa-Pro system.

The analyst summarized the development and explained why even though he still has a “Strong Buy 1” rating on the stock, he has trimmed his price target from (C) $19.00 to $17.00.

“PROF announced the closing of its US$40.25 equity financing, with proceeds intended to accelerate the commercialization of TULSA through the recruitment and deployment of a targeted sales team,” he wrote. “These funds come at an important moment for the company: ~20 days from the enactment of PROF’s favorable CPT-1 reimbursement codes (under CMS), ~6 months from interim data from PROF’s CAPTAIN trial (TULSA vs. surgery), and ~1 year from PROF locking up its first coverage agreements with commercial payors, each representing a material driver of adoption and sales (in order of ascending importance, in our view). Our target price mechanically reduces to $17.00 on account of equity dilution. We maintain our Strong Buy (1) rating as this financing unlocks PROF’s commercial ramp.”

Freeman thinks PRN will post an EBITDA loss of $29.0-million on revenue of $11.0-million in fiscal 2024. He expects those numbers will improve to an EBITDA loss of $8.0-million on a topline of $40.0-million in fiscal 2025.

“We believe PROF’s recent financing drives the company deep into commercial coverage territory — a very good situation for the company,” he added. “We do expect some uptick in installations and, importantly, utilization under CMS reimbursement alone (FY25), but we underscore commercial coverage as the true commercial catalyst for most med tech companies.”