We came across a bullish thesis on AVITA Medical, Inc. (RCEL) on Substack by Steve Wagner. In this article, we will summarize the bulls’ thesis on RCEL. AVITA Medical, Inc. (RCEL)’s share was trading at $12.89 as of Nov 26th.
A doctor and a patient discussing a therapy plan that includes pharmaceutical products.
Avita Medical (RCEL) recently announced strong Q3 2024 financial results and provided business updates that highlight its promising growth trajectory and potential. The company reported commercial revenue of $19.5 million, reflecting a robust 44% year-over-year increase, and an impressive gross profit margin of 83.7%. Although slightly down from the prior year due to engineering and validation costs for the RECELL GO platform, these margins remain exceptional for a company of Avita’s scale. With a cash position of $44.4 million as of September 30, 2024, Avita is well-positioned to execute on its strategic initiatives.
The company has made significant strides in expanding its product portfolio. Through a partnership with Regenity Biosciences, Avita secured exclusive rights to Cohealyx, a collagen-based dermal matrix, with a launch expected in early 2025 following anticipated regulatory clearance. These advancements complement the ongoing transition to RECELL GO, which has driven deeper market penetration and acquisition of new customer accounts for treating full-thickness skin defects. Furthermore, Avita’s amended credit agreement with OrbiMed has enhanced financial flexibility, signaling confidence in achieving future milestones.
Looking ahead, Avita expects Q4 2024 revenue to range between $22.3 million and $24.3 million, marking 58% to 72% growth over the prior year, with full-year 2024 revenue projected at $68 million to $70 million. Management remains committed to reaching cash flow break-even and GAAP profitability by Q3 2025, underlining their disciplined approach to balancing growth with operational efficiency.
Despite these strong financials, operating expenses rose to $30.2 million, driven by investments in sales, marketing, and R&D to support product expansion. Interest expenses also increased due to long-term debt obligations, contributing to a net loss of $16.2 million for the quarter. However, these costs reflect strategic investments in scaling operations and developing innovative solutions like Cohealyx and RECELL GO, both of which hold significant revenue potential.
Avita’s remarkable execution, high margins, and promising pipeline suggest the market may be underestimating its future potential, particularly with RECELL GO and Cohealyx. Management’s cautious yet ambitious guidance, paired with its history of operational success, positions the company as a compelling investment. Current stock levels appear attractive for accumulation, and with strategic milestones on the horizon, Avita remains poised for continued growth.
AVITA Medical, Inc. (RCEL) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 3 hedge fund portfolios held RCEL at the end of the third quarter which was 5 in the previous quarter. While we acknowledge the risk and potential of RCEL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than RCEL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.