Individual investors who want help picking stocks have more than a few options to choose from, including the recommendations of Wall Street analysts.
Right now, InMode (INMD 0.87%) is a medical technology stock that analysts on Wall Street can’t seem to get enough of. Among those who follow InMode, the average analyst is targeting a 47% gain for the stock over the next year.
Analysts usually have considerably more resources to work with than the average retail investor. That said, you shouldn’t choose stocks for your portfolio based entirely on their eye-popping price targets. Let’s examine three of the reasons analysts are pounding the table for InM0ode stock to see if it deserves a spot in your portfolio.
1. InMode’s share of the market for cosmetic procedures is growing
InMode develops and markets a wide range of proprietary medical devices that cosmetic surgeons can use to shape body fat and smooth out wrinkled skin. With a narrow probe inserted under the skin, the company’s BodyTite device produces results similar to those of liposuction, but without any incisions.
BodyTite and other subdermal ablative treatments are responsible for around four-fifths of the company’s total revenue. It also markets hands-free devices, such as Evoke, that rest on the face during treatment without ever puncturing the skin.
Despite providing a temporary solution to wrinkles, cosmetic Botox injections generate more than $2.5 billion in sales annually for AbbVie. BodyTite and similar products, with their ability to permanently alter a person’s fat composition, are raising InMode’s share of the market for non-invasive procedures. In the third quarter of 2022, cosmetic Botox sales rose 17% year over year, while InMode’s sales rose 29%.
In the U.S. alone, the market for non-invasive cosmetic procedures reached $16.4 billion in 2021, and it’s expected to grow at a 14% annual rate through 2030, according to Grand View Research. In 2022, InMode racked up about $454 million in worldwide sales, suggesting there’s a lot of room for its business to grow.
2. A razor-and-blades business model
There are only so many practicing providers of cosmetic procedures, and it’s just a matter of time before most operations that could make use of InMode’s workstations already have one installed. Analysts with an eye on the long term are drawn to InMode because it employs a razor-and-blades business model.
In addition to earning money on initial sales of its workstations, InMode sells the consumable goods that those devices use, which need to be replaced before each procedure, and services its machines. In the third quarter, revenues from services and consumables shot up 53% year over year.
Rapidly growing consumable sales suggest InMode’s products are increasingly popular among both patients and providers. Over the long run, consumables sales could allow the company to continue growing long after its workstations become ubiquitous.
3. InMode stock looks like a bargain
One of the biggest reasons Wall Street expectations suggest big gains could be around the corner is InMode’s relatively low valuation. The stock trades for just 14.3 times management’s adjusted earnings estimate for 2022. By comparison, the average stock in the benchmark S&P 500 index trades at 18.9 times trailing earnings.
InMode is already the go-to provider of fat-melting subdermal ablative devices, and its proprietary technology gives the company a good chance of maintaining its lucrative position over the long run. Put it all together, and you’ll see why this stock is a screaming buy right now.