Breaking Down Block (SQ) Stock Before Q3 Earnings


Shares of med-tech firm TransMedics (US:TMDX) finished the week with a spectacular 24% rally as investor appetite soared following the release of third quarter results. The stock even reached an all time high of $58.90 during mid morning trading, an achievement rarely being seen in 2022.

The stock has performed so well that it ranks in the top 3% of companies with the highest momentum when screened against 41,609 with a Fintel momentum score of 95.62. The stock is up a total of 175% since the beginning of 2022.

The firm continued its growth in sales over the quarter generating $25.7 million in revenue, representing growth of 378% over the year and 25% when compared to Q2. The significant growth was driven by the use of the National OCS Program (NOP) across transplant centres.

Management did note that the figure included a $1.4 million favourable adjustment from accrued clinical trial contract revenue but the result was well ahead of analyst forecasts of around $19 million.

The favourable adjustment also contributed a 2% positive adjustment to the growth in gross margin to 71% from 70% in the prior year. 

TMDX’s operating expenses also expanded during the year to $23.7 million from $15.5 million in the prior year but marginally fell when compared to $24.1 million in Q2. The firm told investors that the increased expenses related to increased investments associated with the NOP, corporate infrastructure and other commercial activities.

Despite the rising costs, management was able to narrow the net loss due to the faster pace that sales had been growing at. TMDX groups net loss narrowed to -$7.4 million from -$13 million in the prior year and outperformed analyst forecasts expecting a loss between $11-12 million. This equated to EPS of -25 cents per share compared to forecasts of around -40 cents.

As a result of the earnings beat and stronger run-rate of revenue, management upgraded full year guidance expectations for sales. TMDX now expects to finish the year with sales between $80-85 million compared to prior guidance that suggested $67-75 million.

TransMedics CEO Waleed Hassanein remained upbeat on the future outlook of the company telling investors, We strongly believe that we are in the early stages of capitalizing on the significant greenfield opportunity that we have created in the transplant space.  We now plan to leverage the solid foundation that we have established in 2022 to drive TransMedics into its next growth phase in 2023.”

Following recent financing activities and debt restructuring, TransMedics ended the quarter with $204.5 million in cash which provides liquidity and flexibility for the next patch of growth.

Allen Gong from JP Morgan discussed how he views the updated revenue guidance as an achievable target with room for further upside. Gong believes there are a number of tailwinds for 2023 that keeps his view bullish on TMDX’s outlook as Heart & Liver segments offset continued Lung weakness. 

The firm sees long-term potential for the Organ Care System and remains ‘overweight’ rated on the stock. The firm also upgraded their price target from $48 to $61 following the result beat.

The response across the street was similar across the board with all institutions revising targets higher. TMDX has a consensus ‘buy’ recommendation and an $80 average price target. 

Institutional ownership and buying activity has been well above average for the stock, which explains the strong share price performance.

Fintel’s institutional accumulation score of 91.80 is bullish on TMDX and ranks the stock in 199th spot when screened against 34,560 other global stocks.

This score identifies companies with the highest level of institutional buying and interest.

TMDX has 311 institutions on the register that own 27.6 million shares of the float. Some of the largest institutions include:

The chart shows the growth of institutional share ownership over time against the share price.


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By Fintel