Analyst Says M&A Could Be A Negative Catalyst For This Aesthetic Company

Needham has downgraded InMode Ltd INMD from Buy to Hold with no price target.
The analyst writes that the 1Q23 aesthetics patient survey indicates that consumers are reducing their spending on procedures.
The average expected spending over the next 6-12 months was $557, down by 20% from $695 in the 3Q22 survey.
Additionally, 7.7% of respondents expect a non-invasive body contouring or liposuction procedure in the next 6-12 months, down by 28% from 10.6% in the 3Q22 survey.
InMode's growth slowed somewhat in 4Q22 from 1Q22-3Q22. It reported Q4 sales of $133.6 million, +21% Y/Y, beating the consensus of $129.14 million.
The company posted an adjusted EPS of $0.78, surpassing the consensus of $0.67.
InMode forecasts FY23 adjusted EPS of $2.58-$2.60 vs. $2.64 estimate, with revenues expected to be $525-$530 million compared to the consensus of $522.72 million.
Management has expressed interest in M&A, and the analyst notes its concern that an acquisition could be a negative catalyst.
An acquisition is likely to be dilutive to INMD's margins and possibly its EPS. Also, investors could take the cynical view that a deal signals that INMD's core equipment business is slowing.
Price Action: INMD shares are down 5.87% at $37.36 on the last check Friday.

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