Entry Price: $31.60
Target Price: $50
Projected Yield: 58.00%
Time Line: 3 to 6 months
Position Size: 2%
Nano-X Imaging Ltd (NNOX.US) is an Israel based medical startup that focuses on developing X-ray equipment and the appropriate software. Nano-X Imaging's products use digital technologies for medical imaging. Currently, the company's portfolio includes two complementary products: Nanox.ARC, which is X-ray equipment, and Nanox.CLOUD, software.
Last August, Nano-X Imaging successfully IPO'ed, and its stock went up immediately. In early 2021, the price reached $90; afterwards, it started going down and then reached its low at $20. This happened mainly due to the sell-off in the tech sector and delays in the supply of components needed to manufacture Nanox.ARC. Despite this, there are multiple reasons for considering this stock a profitable investment, although the risk is quite high.
What's the Idea?
The idea lies in capitalizing on a stock that may rise with financial stability and delivering innovative devices.
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Why Trade Nano-X Imaging?
Reason 1: FDA-Approved
The main risk in the biotech sector is that getting US Food and Drug Administration (FDA) approval is a complex task. Yet, it is FDA that allows companies to start mass production and distribution of their products. In April 2021, Nano-X received this approval (501(k) Premarket Notification Clearance); this means that the FDA confirmed that the prototype version of the Nanox.ARC X-ray device could provide medical images equivalent to other single X-ray tube devices available in the market. This is great news for the company, which brings it closer to success. However, the commercial version of Nanox.ARC has multiple tubes, which means the company needs to get an approval for this version, too. Nevertheless, as both versions share the core structure and generally work in the same way, getting yet another FDA approval is not an issue.
Reason 2: Competitive Edge
Nano-X has a competitive business model that may be put into action with the respective technologies. The company invented a new way of reproducing X-rays, which is both more efficient and cheaper. The cost savings are significant: with mass production, Nano-X lamp will cost $100, while the price of obsolete cathode lamps is around $150,000. This will also affect manufacturing costs: the expected price of the Nano-X product is around $10,000, while the price of similar traditional scanners exceeds $1M.
With this, Nano-X will not only have a competitive edge over the manufacturers of traditional equipment, but will also expand the existing market for X-ray devices. The company will provide an opportunity to purchase its equipment to medical centers with limited budgets that do not allow them to purchase traditional devices.
Curiously, Nano-X is planning to get its earnings not from Nanox.ARC equipment sales, but from licensing fees for using it. Such a SaaS-like business model can provide stable cash flow and be commercially successful, as this will be convenient both for the medical center and the company itself: while the former will not have to invest in expensive equipment and will pay only for use, the latter will have stable income and will be able to more efficiently build its development strategy.
Reason 3: Financial Performance
At the moment, Nano-X is not generating any earnings; however, it should start doing so next year. Initially, the company wanted to get FDA approval for the commercial version of the equipment this year (which will, most likely, come true) and start delivering its products in Q1 2022. However, there were issues with the supply of components, namely ceramic tubes, which had the delivery postponed to a later date.; this news had a negative impact on the stock price.
Currently, Nano-X already has the contracts for 5,150 Nanox.ARC delivery signed, which should generate around $400M a year, as the conservative management assumes. By 2024, the company is going to deliver 15,000 Nanox.ARC devices.
Apart from no earnings generated, Nano-X has a stable financial position. After the IPO, the amount of cash reached $219M, while there is no debt burden. The losses do not exceed $20 million per quarter; in Q1 2021, the loss amounted to $12.70M. Thus, Nano-X has a sufficient supply of funds for further development and establishment of business.
Currently, Nano-X is valued at $1.56B. In case the expected sales figure is reached, the price-to-sales ratio (P/S) will hit 3.94x, which is acceptable for a tech startup company.
In late April, Landerburg Thalmann, an investment company, set Nano-X target price at $52 per share.
How to Use the Idea
- Buy the stock at $31.60.
- Allocate no more than 2% of your portfolio for the transaction. To build a balanced portfolio, you can use the recommendations by our analysts.
- Sell the stock when the price reaches $50.00.
How to Buy Nano-X Imaging?
If you don't have an investment account yet, open it now: this can be done online, in just 10 minutes. All you need to do is fill out a short form and verify your account.
After opening an account, you can buy shares in either of the following ways:
Freedom24 Web Platform: In the Web Terminal section, type NNOX.US (Nano-X Imaging ticker in the NASDAQ) in the search box, and select Nano-X Imaging in the results. Open a secure session in the trading window on the right, select the number of shares you want to buy, and click Buy.
Freedom24 iPhone or Android App: Go to the Price screen and tab the search icon in the top right corner. In the search dialog that will show up, type NNOX.US (Nano-X Imaging ticker in the NASDAQ) and select Nano-X Imaging in the search results. You will then see the stock in the market watch; tap it and go to the Order tab in the dialog that shows up. Specify the number of shares you want to buy and click Buy.
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