Declining Sales In Challenged Oxygen Market Weighs On Inogen's Margins, Analyst Downgrades Stock

Needham analyst Mike Matson downgraded the rating on Inogen, Inc INGN to Hold from Buy, with a price target of $26.

INGN announced it is acquiring privately-held Physio-Assist SAS for $32 million with up to $13 million of additional milestone payments. 

The deal makes sense, but Matson does not expect it to impact INGN's revenue growth until 2025 at the earliest.

However, the analyst notes the transaction will diversify its respiratory portfolio, expand its international market opportunities, and gain access to the bronchiectasis market.

The analyst cautions that INGN needs help with declining sales in a challenged oxygen market. 

However, the new management team has made several changes to the company's strategy, but these have yet to translate into improved revenue growth, Matson adds. 

Additionally, the analyst thinks INGN's margins have deteriorated due to inflationary headwinds, sales channels, and other investments. 

Based on the above, the analyst widened the loss estimates for the second quarter to $(0.69) per share from $(0.59) per share. For 2Q, the analyst expects revenues of $84.2 million, lower than $103.4 million in the year-ago period.

For FY23, the analyst lowered revenue estimates to $318.1 million, compared with the previous expectation of $379 million.

For FY24, the analyst cut revenue forecast to $339 million from ~$405 million.

Price Action: INGN shares are trading lower by 14.4% to $8.78 on the last check Friday.