GLP 1 Skin Laxity Headwinds Will Challenge Surgical Aesthetics Yet Long Runway Remains

Catalysts

About Apyx Medical

Apyx Medical develops and commercializes advanced surgical aesthetic systems and consumables focused on body contouring and skin tightening.

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

• Although AYON and Renuvion align with the rapidly expanding population of patients on GLP-1 drugs who need surgical solutions for skin laxity, adoption could stagnate if plastic surgeons favor lower cost or noninvasive alternatives. This would limit the expected uplift in Surgical Aesthetics revenue growth.
• While the company is leveraging a growing global demand for body contouring procedures and aims to expand AYON into Europe, the Middle East and Latin America, delays in international registrations or weaker distributor execution could mute the anticipated geographic diversification of revenue and constrain total top line over the next several years.
• Although the installed base of AYON systems and Renuvion generators should structurally support higher recurring handpiece utilization, slower than anticipated procedure growth per site or reduced attach rates for Renuvion could dampen consumable sales and restrict gross margin expansion and earnings leverage.
• While the planned FDA label expansion for AYON to include power liposuction in early 2026 would make the platform a more comprehensive solution, any setback in regulatory timing or future product enhancements could allow competing technologies to narrow AYON's differentiation. This could weigh on long term pricing power and net margins.
• Although recent restructuring and cost controls have significantly reduced cash burn and extended the cash runway into 2027, sustained investment needs for R&D, commercialization and global market access in a fast evolving aesthetics landscape could pressure operating expenses and delay the path to consistent earnings profitability.

Assumptions

This narrative explores a more pessimistic perspective on Apyx Medical compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts. How have these above catalysts been quantified?

• The bearish analysts are assuming Apyx Medical's revenue will grow by 9.6% annually over the next 3 years.
• The bearish analysts are not forecasting that Apyx Medical will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Apyx Medical's profit margin will increase from -30.4% to the average US Medical Equipment industry of 12.9% in 3 years.
• If Apyx Medical's profit margin were to converge on the industry average, you could expect earnings to reach $8.1 million (and earnings per share of $0.21) by about December 2028, up from $-14.5 million today.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 30.8x on those 2028 earnings, up from -10.9x today. This future PE is greater than the current PE for the US Medical Equipment industry at 30.4x.
• The bearish analysts expect the number of shares outstanding to grow by 1.19% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.22%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• AYON and Renuvion are heavily tied to the long term GLP 1 trend and the assumption that skin laxity patients will opt for invasive surgical solutions. If cheaper or noninvasive alternatives become preferred, or if reimbursement and consumer spending weaken, procedure volumes could undershoot expectations and constrain revenue growth.
• The strategy to pivot away from OEM manufacturing and concentrate on Surgical Aesthetics increases reliance on one segment and a new flagship platform. If AYON adoption slows after the initial launch, or if competitive technologies erode its perceived differentiation, overall company growth and gross margins could fall short of projections.
• International expansion of AYON is still in early planning stages, with most regulatory and registration work still ahead. If approvals in Europe, the Middle East and Latin America are delayed, or if distributors underperform, the anticipated geographic diversification could be postponed and limit medium term revenue upside.
• Despite restructuring-driven cost cuts and reduced cash burn, the company still operates at a net loss and expects to fund R and D, commercial roll out and working capital for several more years. If AYON sales and consumable utilization do not scale fast enough, ongoing operating losses could pressure the cash balance and increase dilution risk for earnings per share.

Valuation

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

• The assumed bearish price target for Apyx Medical is $5.0, which represents up to two standard deviations below the consensus price target of $6.0. This valuation is based on what can be assumed as the expectations of Apyx Medical's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $8.0, and the most bearish reporting a price target of just $5.0.
  
• In order for you to agree with the more bearish analyst cohort, you'd need to believe that by 2028, revenues will be $63.1 million, earnings will come to $8.1 million, and it would be trading on a PE ratio of 30.8x, assuming you use a discount rate of 8.2%.
  
• Given the current share price of $3.86, the analyst price target of $5.0 is 22.8% 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.