LungTrax And Global Expansion Will Broaden Market Access

Key Takeaways

• Expansion into new markets and innovative tools like LungTrax could grow patient volume, boosting revenue and operational efficiency.
  
• Global growth in Europe, China, and potential in Japan supports geographical diversification and long-term revenue opportunities.
  
• Without accelerating revenue growth and successful expansion into new markets, Pulmonx's strategy faces risks from operating losses, currency fluctuations, and regulatory uncertainties.

Catalysts

A commercial-stage medical technology company that provides a minimally invasive treatment for patients with severe emphysema, a form of chronic obstructive pulmonary disease.

• Expansion of U.S. account base with 52 new centers and increased patient outreach indicates a strong marketing push, likely boosting future revenue and patient volumes.
  
• Introduction of the LungTrax platform and novel screening tools like LungTract Detect are expected to streamline patient identification and increase treatment volumes, improving revenue potential and operational efficiency.
  
• Significant international growth, particularly in China and Europe, along with future expansion in Japan, suggests continued revenue growth and geographical diversification.
  
• Clinical trial initiatives like AeriSeal CONVERT 2 aim to expand the treatable patient base, potentially increasing market share and long-term revenue streams.
  
• Investments in education programs for physicians, along with strategy shifts in sales and marketing, indicate a focus on increasing adoption and awareness, which could enhance sales volumes and margins in the future.

Pulmonx Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Pulmonx's revenue will grow by 17.8% annually over the next 3 years.
• Analysts are not forecasting that Pulmonx will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Pulmonx's profit margin will increase from -67.3% to the average US Medical Equipment industry of 12.9% in 3 years.
• If Pulmonx's profit margin were to converge on the industry average, you could expect earnings to reach $17.7 million (and earnings per share of $0.41) by about May 2028, up from $-56.4 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 37.3x on those 2028 earnings, up from -3.8x today. This future PE is greater than the current PE for the US Medical Equipment industry at 31.6x.
• Analysts expect the number of shares outstanding to grow by 2.53% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.47%, as per the Simply Wall St company report.

Pulmonx Future Earnings Per Share Growth

Risks

• The guidance for 2025 anticipates revenue growth between 16% to 18%, which is below the long-term growth target of 20%, suggesting that scaling up growth initiatives might take longer than anticipated, potentially impacting revenue projections.
  
• Pulmonx is still operating at a net loss, with a net loss of $56.4 million for 2024, which could pressure future earnings and cash flow if revenue growth does not accelerate as expected.
  
• The company faces potential risk from international and currency fluctuations, which could impact revenue and margin stability, considering part of the revenue growth is expected from international markets.
  
• The expansion initiatives, while promising, involve substantial upfront costs and operational challenges that might not yield the anticipated return on investment or could lead to increased operating expenses without immediate revenue offset, pressuring net margins.
  
• There is uncertainty regarding the timing and regulatory approval of new markets and products (e.g., AeriSeal CONVERT 2 trial, Japanese market), which could delay anticipated revenue streams and impact long-term growth forecasts.

Valuation

• The analysts have a consensus price target of $12.357 for Pulmonx based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $17.0, and the most bearish reporting a price target of just $7.5.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $137.0 million, earnings will come to $17.7 million, and it would be trading on a PE ratio of 37.3x, assuming you use a discount rate of 7.5%.
• Given the current share price of $5.27, the analyst price target of $12.36 is 57.4% 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.