On Monday, Piper Sandler changed its stance on Xeris Pharmaceuticals (NASDAQ:XERS), a company trading on NASDAQ under the ticker NASDAQ:XERS, by downgrading its stock rating from Overweight to Neutral while maintaining a price target of $3.00. The firm cited the gradual path to significant EBITDA generation as a key reason for the downgrade, despite acknowledging the company's top-line progress.
Xeris Pharmaceuticals recently updated its 2024 revenue guidance to a range of $198 million to $202 million, an increase from the previously projected $190 million to $200 million. The company also reported a third-quarter net loss per share of $0.11, which is a narrower loss than the Street's estimates of $0.09 per share. Total (EPA:TTEF) revenues for the quarter stood at $54.3 million, surpassing expectations of $51.4 million.
However, Piper Sandler expressed concerns regarding Xeris Pharmaceuticals' cost structure, which is considered disproportionate to the company's commercial model focused on endocrinology and rare diseases. This factor contributes to the belief that the company's path to significant EBITDA generation will be gradual.
The firm also noted that Xeris's stock price has increased by approximately 50% year-to-date and is currently trading at an enterprise value to estimated 2026 EBITDA ratio of around 15 to 16 times. This valuation led Piper Sandler to conclude that the shares are fairly valued at present.
This assessment takes into account the anticipated expansion of Xeris's Recorlev product for Cushing's syndrome, with projected sales rising from $63 million in 2024 to $137 million in 2027.
InvestingPro Insights
Recent data from InvestingPro provides additional context to Piper Sandler's assessment of Xeris Pharmaceuticals. The company's market capitalization stands at $517.31 million, with a revenue of $187.36 million for the last twelve months as of Q3 2023. Notably, Xeris has demonstrated strong revenue growth, with a 22.72% increase over the same period.
Despite this top-line progress, which aligns with Piper Sandler's observations, InvestingPro Tips highlight that Xeris is not currently profitable. This supports the firm's concerns about the company's cost structure and gradual path to significant EBITDA generation. The operating income margin of -24.11% for the last twelve months further underscores these challenges.
On the market front, Xeris has shown remarkable price performance, with a 105.93% return over the past year and a 97.16% return over the last six months. This aligns with Piper Sandler's note on the stock's significant year-to-date increase. An InvestingPro Tip indicates that the stock is trading near its 52-week high, with the current price at 95.33% of that level.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Xeris Pharmaceuticals, providing a deeper understanding of the company's financial health and market position.
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