On Friday, Piper Sandler reaffirmed its Overweight rating on OrthoPediatrics Corp. (NASDAQ:KIDS), with a steady price target of $44.00. The firm's stance comes after evaluating the company's strategic expansion within the pediatric specialty bracing market.
OrthoPediatrics' acquisition of Boston O&P late last year is central to this optimistic outlook, as it not only broadened the company's product portfolio but also added clinics, primarily in the Northeastern U.S., to enhance patient services.
The acquisition is seen as a significant move into an approximately $800 million domestic market opportunity—a sector OrthoPediatrics had previously had limited exposure to. Piper Sandler projects that OrthoPediatrics could substantially grow its market share in the coming years. The firm anticipates that there could be potential upside to current financial estimates for OrthoPediatrics and suggests that the franchise might eventually reach $200 million in revenue, with the added benefit of strong operating margins and free cash flow (FCF).
The business expansion is expected to not only solidify OrthoPediatrics' competitive edge in the specialty bracing segment but also to provide advantages to its implant franchise. The analyst from Piper Sandler expressed a belief that the full impact of the Boston O&P acquisition on OrthoPediatrics' future performance is not yet fully recognized by investors. The firm remains positive on the company's prospects and reiterates its constructive stance on the stock.
In other recent news, OrthoPediatrics Corp. observed a significant surge in growth for Q2 2024, with a 52% increase in the number of children served and a 33% rise in revenue, reaching a record $52.8 million. This growth was primarily driven by the trauma and deformity, domestic scoliosis, and specialty bracing businesses. The company remains committed to its full-year 2024 revenue guidance of $200 million to $203 million.
Additionally, OrthoPediatrics has announced its future growth strategies, including new product launches and international expansion. The firm secured a $25 million term loan and additional access to a $25 million delayed draw term loan facility, and a stock repurchase program of up to $5 million was also revealed. Ahead of the company's first Analyst & Investor Event, BTIG reaffirmed its Buy rating for OrthoPediatrics.
The event is expected to provide clarity on the company's long-term growth trajectory and respond to key questions that could bolster investor confidence. Lastly, OrthoPediatrics expects to produce $8-9 million in adjusted EBITDA in 2024 and aims to achieve cash flow breakeven by 2026.
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