Dive Brief:
- iRhythm Technologies convinced analysts at William Blair that the company’s outlook is positive and growth will probably accelerate through 2023.
- iRhythm, which makes cardiac wearables, lowered its fourth-quarter earnings forecast in response to “softness in returned devices,” but began 2023 with an update that suggested it’s recovering, the analysts said.
- “Progress to date is positive and should ease recent concerns,” they added, while noting that the company “still has a way to go on issues like device return rates and [Zio] AT reacceleration.”
Dive Insight:
Based on the update and talks with iRhythm executives including CEO Quentin Blackford, analysts at William Blair expect the company to come close to its revenue forecast when it reports fourth-quarter results in the coming weeks. The analysts are focused on several areas that will shape how iRhythm fares in 2023.
The analysts are looking for updates on Zio AT, iRhythm’s real-time cardiac monitor patch used for higher-risk patients. Late last year, iRhythm issued a customer advisory notice with updated language related to precautions. The company subsequently saw “reduced growth” early in the fourth quarter.
iRhythm’s performance in 2023 will be influenced by how quickly the product returns to its prior growth trajectory, according to William Blair. The analysts expect the company to “have more clarity on reacceleration in the spring.”
“We believe this is simply a matter of when, not if, and view our estimate for roughly 30% growth in 2023 as achievable (below the near-40% growth in the first nine months of 2022 but above the 20% growth guidance previously provided for the fourth quarter),” they wrote.
Device return rates were another driver of the weak end to 2022 at iRhythm, the analysts said, adding they “expect return rates to remain a headwind to units in early 2023, though they should recover over the course of the year.”
