Canaccord starts Neuronetics at buy; PT $33

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Canaccord Genuity initiated coverage of Neuronetics (NASDAQ:STIM) with a “buy” rating and $33 price target. The stock closed at $26.02 on July 23.

“Possessing a clinically validated, proprietary, non-invasive technology to treat depression, Neuronetics represents a compelling growth story in the medical device space, in our view,” writes analyst Jason Mills. 

He said the company passes our five-point small-cap, med-tech stock-picking algorithm with “flying colors.” 

Mr. Mills said these include a huge total addressable market (TAM), targeting major depressive disorder (MDD) patients who have failed medications; successfully developing the market for transcranial magnetic stimulation and a gaining shareof MDD patients; and possessing one of the highest gross margin profiles in med-tech, rising to an estimated 79% by 2021 from 76% in 2018.

“We can justify a higher valuation predicated on Neuronetics’ strong growth/growth margin profile, offering myriad catalysts over the next three-to-five years that could both expand the firm’s TAM and sustain strong underlying revenue growth, margin expansion and eventually solid profitability and cash flow,” Mr. Mills added.

Stephen Kilmer