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JPMorgan Downgrades ConforMIS After Its Sales Outlook Dropped $5 Million

Although ConforMIS Inc CFMS 49.36% delivered a 1Q top-line beat, the guidance was disappointing. JPMorgan’s Michael Weinstein downgraded the rating for the company from Overweight to Neutral, while reducing the price target from $18 to $8. He cited the reasons as the reduced 2016 guidance and significant uncertainty around “the true trajectory of the business.”

ConforMIS reported its 1Q revenue at $20.3 million, representing 38 percent growth, and ahead of the consensus expectation by $1.1 million.

Indications From Management

Analyst Michael Weinstein said that management Commentary suggested the beat was one-time in nature, and was on account of:

  • A backlog of cases pushed to 1Q by the recall in 2H15
  • A decline in order lead times from eight weeks to six weeks

“Commentary around the PS launch was encouraging, but guidance around the base business implies a flat to down CR and Uni business in 2016,” Weinstein wrote. While order rated were improving, they continued to be below pre-recall levels. iTotal PS could continue to ramp in 2016, but the remaining business was likely to have “little to no momentum.”

Management reduced its full-year sales outlook from $83-$86M to $75-$80M. ConforMIS announced that the search to replace founder and CEO Dr. Philip Lang had been initiated by the Board, and it was “targeting someone with more commercial experience,” the analyst mentioned.

May 2016JP MorganDowngradesOverweightNeutral
May 2016Wells FargoDowngradesOutperformMarket Perform
Dec 2015Sterne Agee CRTInitiates Coverage onBuy

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