In a report released yesterday, Jonathan Block from Stifel Nicolaus downgraded Sonendo (SONX – Research Report) to a Hold, with a price target of $0.25.
Jonathan Block has given his Hold rating due to a combination of factors including Sonendo’s recent performance and future outlook. While the fourth quarter of 2023 saw revenues and earnings before interest and tax (EBIT) losses aligning with expectations, the forecast for 2024 suggests a significant shortfall in revenue compared to previous estimates. This disappointing revenue guidance is a key concern, as it falls substantially below the expected numbers even after accounting for the sale of the TDO software. Additionally, the year-over-year decline in sales, as management revises its sales approach, and the continued decrease in utilization rates for procedure instruments (PIs), which is a critical metric for Sonendo, contribute to the cautious stance.
Despite a solid performance in the challenging dental and capital equipment market, with console revenue and non-GAAP gross margin meeting estimates, and operational expenses coming in under projection, the overall financial health of the company appears weakened. The reduced average selling price (ASP) of consoles in the quarter also raises concerns. With a full-year revenue guidance for 2024 that is well below prior estimates and an anticipated slower gross margin ramp, the foreseeable future for Sonendo looks challenging. These factors, combined with the potential impact on utilization from a new billing code for PIs, have led Block to adopt a wait-and-see approach, moving to the sidelines until the company demonstrates progress in capital sales and PI utilization.
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Sonendo (SONX) Company Description:
Sonendo Inc is a commercial-stage medical technology company focused on saving teeth from tooth decay, the most prevalent chronic disease globally.
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