US Hospital Workflows Will Delay Progress Yet Recovery Will Follow

Key Takeaways

• Slow adoption, complex referral pathways, and hospital constraints in the U.S. could delay Pulmonx's revenue growth and near-term earnings improvement.
  
• Global cost pressures, long sales cycles, and challenges in clinical adoption may restrict scalability, margin expansion, and timely realization of new market opportunities.
  
• Slower U.S. adoption, margin pressure from international sales, and high cash burn pose risks to sustainable growth and long-term earnings improvement.

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.

• While Pulmonx is benefiting from the global rise in chronic respiratory disease prevalence and healthcare system prioritization of minimally invasive treatments, slow adoption in the U.S. due to referral pathway complexity and hospital capacity constraints continues to delay revenue growth and may impact the company's ability to turn top-line momentum into sustained earnings improvement.
  
• Despite increasing healthcare expenditure and expanding international demand, persistent pressure from global reimbursement and cost-containment efforts could limit the scalability of advanced procedures like Zephyr Valve implantation, potentially constraining overall top-line growth and net margins in the medium term.
  
• The expansion and digitization of lung cancer screening programs are laying critical groundwork for future patient identification, yet the longer-than-expected sales cycles, delayed account ramp-up, and coordination challenges with hospital administrators threaten near-term acceleration in U.S. procedure volumes, reducing visibility into revenue realization.
  
• Pulmonx's portfolio investments, such as AI-driven patient identification and new product trials, align with the shift toward patient-centric and innovative care, but the long lead times for clinical adoption, ongoing R&D spending, and dependence on successful market education risk sustained operating losses and continued cash burn.
  
• While competitor encroachment is not yet impacting market share, the risk remains that alternative non-device based therapies, digital health solutions, or industry-wide pricing pressures could erode future recurring revenue streams and impede long-term improvements in operating leverage and profitability.

Pulmonx Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Pulmonx compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Pulmonx's revenue will grow by 11.6% annually over the next 3 years.
• The bearish 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 -62.9% to the average US Medical Equipment industry of 12.4% in 3 years.
• If Pulmonx's profit margin were to converge on the industry average, you could expect earnings to reach $15.7 million (and earnings per share of $0.35) by about August 2028, up from $-56.9 million today. The analysts are largely in agreement about this estimate.
• 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 9.5x on those 2028 earnings, up from -1.1x today. This future PE is lower than the current PE for the US Medical Equipment industry at 27.4x.
• Analysts expect the number of shares outstanding to grow by 4.07% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 9.57%, as per the Simply Wall St company report.

Pulmonx Future Earnings Per Share Growth

Risks

• Pulmonx is experiencing slower than expected growth in the U.S. due to lengthy hospital contracting processes, complex stakeholder workflows, and ongoing capacity constraints at interventional pulmonology centers, which could restrain near
• and long-term revenue growth as domestic adoption takes longer to ramp than previously anticipated.
  
• The company has revised downward its 2025 revenue guidance to a range of $90 to $92 million from its previous $96 to $98 million, indicating that its key commercial initiatives are converting at a slower pace, which may reflect persistent challenges in driving procedural volume and could impact future net margins if growth initiatives continue to underperform.
  
• Gross margin declined year-over-year from 74 percent to 72 percent, largely due to a shift in geographic revenue mix with a higher proportion of international and distributor sales, suggesting that future margin pressure could continue as international growth outpaces the U.S., potentially weighing on earnings if geographic mix trends persist.
  
• Net loss remains significant at $15.2 million for the quarter, with operating expenses rising 3 percent and continued high cash burn, highlighting that prolonged periods of low U.S. revenue growth combined with ongoing investment in commercial and R&D activities could put further pressure on net earnings and the company's cash position.
  
• The path to higher revenues is highly dependent on systemic changes in hospital workflows and administration buy-in, as well as successful execution of novel outreach and screening initiatives, making long-term growth vulnerable to even modest setbacks in clinical adoption or slower integration of Pulmonx's technologies into mainstream pulmonary care, which could affect both revenue scalability and sustainable margin improvement.

Valuation

• The assumed bearish price target for Pulmonx is $2.5, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Pulmonx'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 $16.0, and the most bearish reporting a price target of just $2.5.
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be $126.0 million, earnings will come to $15.7 million, and it would be trading on a PE ratio of 9.5x, assuming you use a discount rate of 9.6%.
• Given the current share price of $1.56, the bearish analyst price target of $2.5 is 37.6% 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.