Analyst Upgrades This Radiology Stock, Expects Promising 2023 Ahead

Raymond James upgraded Radnet Inc RDNT from Market Perform to Outperform and a price target of $30 following 4Q22 results that came in ahead of expectations.
The management noted they experienced $30 million in incremental labor costs in 2022, which should move to roughly $17 million in incremental costs for 2023.
Management provided incremental color on the AI segment, with the Enhanced Breast Cancer Detection (EBCD) program expected to generate most of the segment’s 2023 revenue.
The analyst writes that the upgrade is predicated on the following:
- A core business supported by structural tailwinds, driving MSD-HSD EBITDA growth as labor pressures ease.
- The shedding of the AI overhang as there is now improved strategic visibility.
- A reasonable valuation (8.3x 2024E EBITDA) leaves ample room for upside if the stock can earn a reputation of a dependable compounder.
The analyst writes that with labor and reimbursement headwinds easing, investors are expected to grow increasingly comfortable with the name given a favorable demand backdrop, solid core business, and AI segment gaining momentum.
Price Action: RDNT shares are trading 4.72% higher at $23.81 on the last check Friday.