Inspire Medical Systems is Wednesday's IBD Stock Of The Day. The sleep apnea expert reported massive fourth-quarter sales growth, leading INSP stock to break out.
The company sells an implantable device to treat sleep apnea through electrical stimulation of the nerves — a process called neurostimulation. During the December quarter, sales rocketed 76% year over year to $137.9 million. Earnings were 10 cents a share, turning around from a year-earlier loss.
Sales came in at the high end of Inspire's preannouncement in early January and beat Wall Street calls for $131.1 million, according to FactSet. Analysts projected a loss of 61 cents a share.
There's still plenty of room to run in sleep apnea, JPMorgan analysts said in a recent note.
"By our math, penetration of the U.S. sleep apnea market opportunity is only in the low single digits, leaving significant room for future share capture in Inspire's core market," they said.
INSP Stock Soars On Earnings Beat
The earnings beat sent INSP stock flying 7.3% to close at 267.71 on today's stock market. That pushed shares above a buy point at 262.64 out of a flat base, according to MarketSmith.com. Shares also bounded above their 50-day moving average.
During the quarter, Inspire opened 61 new centers in the U.S., bringing the total up to 905 centers able to implant the company's sleep apnea device. On average, each center is implanting about 1.45 devices per month, Bank of America analyst Travis Sneed said in a recent note to clients. That's up from roughly 1.13 in 2021 and 0.87 in 2020.
"However, a handful of centers are already doing over eight implants a month," Sneed said.
The company also plans to launch a new device called Inspire V in late 2023 or early 2024. The new device takes less time to implant, helping increase the number of implants each center can perform, Sneed said. He kept his buy rating on INSP stock.
Opportunities Beyond Sleep Apnea
The JPMorgan analysts also noted there are opportunities for Inspire outside of sleep apnea.
In the future, the neurostimulation device could be used in children with Down syndrome. Insurance plans also could allow people with less-severe sleep apnea scores and lower body mass index to receive the Inspire implant. The risk of developing obstructive sleep apnea increases with a higher BMI.
These opportunities could increase Inspire's total addressable market by 20%, the analysts said.
Notably, a number of CPAP machines — also known as continuous positive airway pressure machines — were recalled in 2021 from Philips Respironics due to safety issues. These wearable devices are common treatments for sleep apnea.
"With no competition in the U.S. market, we see a clear path to continued conversion from CPAP," the JPMorgan analysts said.
They listed INSP stock as a top pick among small- or midcap companies.
Strong Sales Growth Projected
For the year, Inspire expects $560 million to $570 million in sales, which would represent 37%-40% growth. The Street projects $569.6 million in sales this year.
INSP stock has a strong Relative Strength Rating of 91. This puts shares in the leading 9% of all stocks when it comes to 12-month performance, according to IBD Digital. Leading stocks tend to have RS Ratings of at least 80.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
