On Monday, Morgan Stanley (NYSE:MS) initiated coverage on Procept BioRobotics Corp (NASDAQ: PRCT) with an Overweight rating and set a price target of $105.00. Trading at $95.59, the stock has delivered remarkable returns with a 128% gain year-to-date and 156% over the past year. According to InvestingPro, the company maintains strong financial health with a current ratio of 6.02, indicating robust liquidity.
The analyst pointed out that despite the high current valuation of the stock at 16.6 times its projected 2025 enterprise value to sales, there is a pathway for further upside. While InvestingPro analysis suggests the stock is currently trading above its Fair Value, the impressive 71.71% revenue growth in the last twelve months supports the premium valuation.
The current stock price is believed to factor in a conservative estimate of Procept BioRobotics' market share and profit margins. The firm's projections suggest the company could achieve higher penetration in the benign prostatic hyperplasia (BPH) procedures market, potentially reaching or exceeding 50% penetration.
Compared to its peers in the fast-growing MedTech Small and Mid-size (SMID) sector, Procept BioRobotics is performing exceptionally well with an estimated organic sales growth of 26% from 2024 to 2026, which is significantly higher than the 15% growth rate of its peers. Morgan Stanley also anticipates approximately $50 million in sales upside, which is 12% above the consensus, and an increase in gross profits based on the company's pricing strategy and new Hydros system placements.
The bullish scenario set by Morgan Stanley for Procept BioRobotics has a valuation of $125, accounting for the full upside from price and mix gains on Hydros, along with an accelerated pace of system placements. On the contrary, the bearish case valuation is set at $65, assuming the company's market penetration caps at around 15% and it faces challenges in achieving significant profitability. With a strong analyst consensus rating of 1.62 and 6 analysts recently revising earnings upward, detailed analysis and additional insights are available in the comprehensive Pro Research Report on InvestingPro.
In other recent news, Procept BioRobotics has made significant strides in the urology market with its minimally invasive, robotic surgical solutions. The company's newly approved Hydros system, which reduces procedure times by approximately 10 to 20 minutes, has been recognized by Jefferies for its potential to encourage surgeon adoption and initiate a replacement cycle for older systems. Despite this, Jefferies maintains a Hold rating on the company's stock.
Meanwhile, Truist Securities has maintained a Buy rating on Procept BioRobotics, raising its price target to $105 following the company's strong third-quarter performance. The company reported a robust 66% year-over-year increase in revenues, totaling approximately $58.4 million, largely attributed to the company's Hydros units. Truist Securities has noted the potential for additional revenue opportunities in the near future.
BTIG, however, has maintained a Neutral rating on Procept BioRobotics, despite the company's third-quarter financial results surpassing both BTIG's and consensus estimates. The company's success this quarter was attributed to the pricing power within its customer base, with around 80% of system placements in the third quarter being Hydros units.
In other developments, Procept BioRobotics has initiated a public offering of common stock valued at $175 million, with BofA Securities, Piper Sandler, and Morgan Stanley serving as the joint book-running managers. The company also announced a new clinical trial for Aquablation therapy, further expanding its product offerings.
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