Aging Population Will Drive Non-Invasive Diagnostic Adoption

Key Takeaways

• Rapid expansion into new diagnostic and digital asset markets could drive substantial revenue, asset growth, and earnings leverage beyond mainstream expectations.
  
• The shift to value-based care and remote diagnostics positions Semler to capture outsized market share and operational efficiency in chronic disease management.
  
• Heavy reliance on bitcoin strategy, declining healthcare revenue, limited product diversity, regulatory scrutiny, and aggressive financing all heighten financial and operational risks.

Catalysts

Provides technology solutions to enhance the clinical effectiveness and efficiency of healthcare providers in the United States.

• Analyst consensus recognizes the potential of new FDA clearances and product innovation, but it likely underestimates how rapidly Semler could unlock adjacent cardiovascular and heart failure diagnostic markets-delivering outsized recurring revenue growth as demographic and prevention-focused trends intensify.
  
• While analysts broadly agree that expanded insurer and health system partnerships will gradually grow the installed base and usage, this trend could inflect much sooner as value-based care accelerates adoption-potentially boosting both revenues and net margins via higher testing volumes and long-term contract wins.
  
• The company's aggressive, well-capitalized bitcoin treasury strategy, powered by a $500 million ATM and high leverage, gives it the potential for extraordinary net asset growth and earnings leverage if digital asset adoption by corporations or governments accelerates.
  
• Expansion into diverse customer segments and new indications could create a robust, defensible ecosystem, positioning Semler as the default provider in multiple high-growth, chronic disease management verticals-amplifying top-line and long-term earnings potential beyond the consensus view.
  
• Continued advancements in remote diagnostics and seamless healthcare integration could allow Semler to capture a disproportionate share of the rapid shift toward patient-centric care, significantly accelerating operational efficiencies and profit margins as testing increasingly moves outside traditional clinical settings.

Semler Scientific Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Semler Scientific compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Semler Scientific's revenue will decrease by 23.4% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from -60.7% today to 36.9% in 3 years time.
• The bullish analysts expect earnings to reach $8.2 million (and earnings per share of $0.19) by about August 2028, up from $-29.9 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 bullish analyst cohort, the company would need to trade at a PE ratio of 427.4x on those 2028 earnings, up from -26.7x today. This future PE is greater than the current PE for the US Medical Equipment industry at 28.3x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.27%, as per the Simply Wall St company report.

Semler Scientific Future Earnings Per Share Growth

Risks

• Semler Scientific's overwhelming focus on a bitcoin treasury strategy introduces significant exposure to bitcoin price volatility and macro risk, which may cause large swings in reported net income and shareholder equity, directly impacting long-term earnings stability and the predictability of cash flows.
  
• Ongoing declines in healthcare revenues, down approximately forty-four percent year-over-year due to unfavorable CMS payment changes for PAD-related testing, highlight the company's revenue concentration risk and suggest long-term revenue erosion if reimbursement rates remain pressured or further deteriorate.
  
• Heavy dependence on the QuantaFlo device and lack of significant product diversification leaves Semler vulnerable to technological disruption from AI-driven and multi-diagnostic competitors, which could reduce their market share and lead to declining future revenues and gross margins.
  
• Increasing regulatory scrutiny, as evidenced by the need for a $29.8 million contingency reserve related to a Department of Justice settlement and ongoing legal costs, raises the prospect of elevated compliance and settlement expenses, pressuring net margins and reducing funds available for business innovation.
  
• Semler's aggressive leverage and recurring ATM share issuance strategy to finance bitcoin purchases could dilute existing shareholders and leave the company with elevated debt levels, creating long-term risks for the company's balance sheet, interest expenses, and ultimately future earnings if either the health care business does not recover or bitcoin prices decline.

Valuation

• The assumed bullish price target for Semler Scientific is $101.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Semler Scientific's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $101.0, and the most bearish reporting a price target of just $61.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $22.1 million, earnings will come to $8.2 million, and it would be trading on a PE ratio of 427.4x, assuming you use a discount rate of 7.3%.
  
• Given the current share price of $34.46, the bullish analyst price target of $101.0 is 65.9% 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.