By Michael Dabaie
Inogen’s supply constraints may be starting to ease, Needham analysts said as they upgraded the maker of portable oxygen concentrators to Buy from Hold.
“We believe that INGN’s supply chain issues are temporary, adequately factored into consensus, and may already be starting to improve. INGN is expanding its physician sales force to drive growth in its [direct-to-consumer] Rentals business, and we believe this business should continue to see strong double-digit growth” and contribute 5% to 6% to Inogen’s overall revenue growth just by itself, Needham said in an analyst note. The firm set a price target at $47.
Shares were up 5.5% to $34.89 in Thursday afternoon trading.
Needham noted that at a recent conference, management said they are seeing early signs of improvement in the chip supply chain.
Inogen is purchasing chips through the open broker channel. Chief Executive Nabil Shabshab said at a Stifel conference in November said “the bulk of the demand we’re meeting today is from the open broker channel at premium pricing. That’s not going to change dramatically.”
“Prices are not going down, but availability and willingness for people to meet their shipment days continues to be trending in the right direction,” Mr. Shabshab said at the conference in November.
“The other variable that has moved also slightly positively, trending in the right direction, is the fact that we’ve had now conversations with the regular channel in terms of the actual OEMs that supply these chips through their distributors, whereby there has been some willingness to commit to shipment quantities and dates, albeit staggered throughout 2022 to the back end,” Mr. Shabshab said at the conference.
Discussing concerns about backlog in ports, Mr. Shabshab said “we’re not using sea freight these days at all. We’re using airfreight because they’re light, smaller quantities and we’re paying the premium, but this is not a concern for us, at least I want to take that off the table.”
Needham said in its analyst note Thursday it believes that consensus revenue estimates account for the supply chain issues. The analyst said its view is supported by the medical technology company’s third-quarter revenue beat.
Third-quarter total revenue of $93.1 million, up 25.3% on year, came in above the FactSet consensus of $86.7 million.
Inogen in its third-quarter results from early November passed on giving detailed guidance for full-year 2021, saying it continues to see ongoing uncertainty caused by supply chain disruptions, the increased cost of critical components and the continued and varying impacts of the Covid-19 pandemic.
Inogen said at the time it believes the semiconductor chip shortage will likely continue to have a negative impact on its ability to manufacture products, as these chips are used across all its portable oxygen concentrators in both its batteries and printed circuit boards.
Write to Michael Dabaie at [email protected]
