GLP-1 Aesthetic Demand And New Procedures Will Drive Long-Term Opportunity

Catalysts

About AirSculpt Technologies

AirSculpt Technologies operates a network of body contouring centers that provide minimally invasive fat removal, skin tightening and related aesthetic procedures.

What are the underlying business or industry changes driving this perspective?

• Rising GLP-1 usage is creating a large, dedicated pool of patients with loose skin and residual contour issues. AirSculpt's early move into skin tightening and excision procedures positions it to capture incremental procedure volume and lift top line revenue.
• Higher conversion rates among GLP-1 patients, combined with targeted marketing and influencer campaigns, may improve lead quality and close rates, which would support a gradual recovery in same-store sales and overall earnings.
• Expanding a suite of complementary procedures that can be performed under local anesthesia in existing clinics leverages fixed infrastructure and staffing. This may drive better capacity utilization and support operating margin expansion.
• Ongoing SG&A discipline, vendor optimization and the exit of the unprofitable London center are structurally lowering the cost base. This may improve net margins even if revenue growth remains modest in the near term.
• Continued debt repayment and improved balance sheet flexibility reduce interest expense and financial risk. This allows more cash flow to be reinvested in new procedures and marketing, which may enhance long-term earnings power.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming AirSculpt Technologies's revenue will grow by 7.1% annually over the next 3 years.
• Analysts are not forecasting that AirSculpt Technologies will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate AirSculpt Technologies's profit margin will increase from -11.4% to the average US Healthcare industry of 5.5% in 3 years.
• If AirSculpt Technologies's profit margin were to converge on the industry average, you could expect earnings to reach $10.6 million (and earnings per share of $0.14) by about December 2028, up from $-18.0 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 52.6x on those 2028 earnings, up from -10.6x today. This future PE is greater than the current PE for the US Healthcare industry at 22.2x.
• Analysts expect the number of shares outstanding to grow by 6.59% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.96%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Consumer spending on discretionary aesthetic procedures may remain pressured by a weaker macro environment and higher financing costs, prolonging the current double digit decline in cases and same store revenue and limiting the pace of any top line recovery and earnings growth.
• The GLP-1 driven body contouring opportunity may scale more slowly than expected because many patients require more complex excision procedures with longer decision cycles and higher cost. This could constrain procedure volume, elongate sales cycles and dampen revenue growth.
• Structural increases in acquisition costs as competition intensifies for GLP-1 and aesthetic patients, evidenced by rising customer acquisition cost per case, may offset SG&A savings and result in sustained pressure on operating margin and net margins.
• Execution risk around new procedures, technology implementations and the transition to a new CFO, including further impairments such as the Salesforce write down or underperforming centers, could lead to additional noncash charges and higher operating costs. This may weigh on reported earnings and investor confidence.
• High leverage relative to cash generation and a history of net losses, combined with guidance cuts such as the reduction of the 2025 revenue outlook, may limit balance sheet flexibility and increase refinancing or dilution risk. This could negatively impact earnings per share and valuation multiples.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $6.0 for AirSculpt Technologies based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be $193.7 million, earnings will come to $10.6 million, and it would be trading on a PE ratio of 52.6x, assuming you use a discount rate of 7.0%.
  
• Given the current share price of $3.04, the analyst price target of $6.0 is 49.3% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.