iRhythm Technologies' Market-Leading ZioService to Dominate ACM Sector: Analyst Initiates with Outperform Rating

Baird initiated coverage on iRhythm Technologies Inc IRTC with an Outperform rating and a $130 price target. 

The company's market-leading ZioService is positioned to become the standard of care in the rapidly growing ambulatory cardiac monitoring (ACM) sector, the analyst writes, which sees approximately 6 million annual tests in the US (with only about 25% penetration). 

The analyst sees a durable and linear high-teens to 20% growth outlook over the next five years, with plenty of upside potential.

Newer account openings, specifically within large IDN PCP networks, should accelerate capturing the broader US PCP opportunity. Baird sees IRTC's PCP volumes growing at a ~25% CAGR.

In the company's 5-year outlook, management laid out plans to expand into multiple international markets that are in the early days, and a more aggressive ramping contribution should provide accretive growth through' 28E.

By 2027E, management anticipates international revenue will represent ~8% of total company revenue (up from ~3%).

The company's ZioWatch and ZEUS system offer the potential for a clinical-grade cardiac monitoring platform for mid- to longer-term monitoring, but clinical evaluation, business model development, and reimbursement pathways remain hurdles ahead.

The analyst also acknowledges that IRTC received a Warning Letter from the FDA (following a 2022 inspection) alleging non-conformities to medical device regulations relating to the Zio AT system in May. It says the action creates an overhang for the stock and a longer-term growth driver.

Price Action: IRTC shares are down 0.56% at $100.62 on the last check Wednesday.