Why is the Nanosonics share price sinking?

Nanosonics shares are sinking on Monday…

| More on:
A health professional wearing a stethoscope and scrubs shrugs with uncertainty.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • Nanosonics shares are sinking on Monday
  • This follows the release of a business update which revealed FY 2022 revenue ahead of consensus estimates
  • No commentary on its margins or profits may have spooked investors

The Nanosonics Ltd (ASX: NAN) share price is on course to start the week a sizeable decline

At the time of writing, the infection prevention company's shares are down over 5% to $4.36.

This is despite the Nanosonics share price storming 5% higher shortly after the open.

Why is the Nanosonics share price sinking?

Investors have been selling down the Nanosonics share price on Monday following the release of an update on its sales model transition in the North America.

According to the release, the company's transition completed successfully with a significant proportion of all consumables sales now going through the direct channel.

The company also revealed that its North American new installed base increased by 2,650 units in FY 2022. This is an increase of 11% over the prior corresponding period. This took its global installed base to 29,850, which is up 12% year on year.

Positively, during the fourth quarter, Nanosonics' expanded North American team sold 91% of all new installed base units.

Furthermore, the number of upgrade units sold in the second half in North America was up 32% over the first half. Of the upgrade units sold in the second half, 63% were in the fourth quarter with the Nanosonics team responsible for 86% of those sales.

Management expects this trend to continue, with the significant majority of future capital sales (both new installed base and upgrades) to be made by Nanosonics.

In light of the above, the company expects to report full-year revenue of $120.3 million in FY 2022. This will be a 17% increase on the prior corresponding period and is ahead of the market consensus estimate of ~$115 million.

So why are its shares sinking?

Given the revenue beat, the weakness in the Nanosonics share price today has been a bit of a surprise.

However, it is worth noting that one thing missing from its update was any talk about costs or margins. These have been a major concern for investors and are part of the reason why short sellers have been targeting Nanosonics.

The lack of an update on its profitability could have spooked investors and sent them to the exits this morning.

Investors will have to wait until 23 August for its results to find out how the transition has impacted its margins.

Management commentary

Nanosonics' CEO Michael Kavanagh said:

The strategic move to a more direct sales model in North America is now substantially complete with the expanded Nanosonics operation fully in place. The collaboration between Nanosonics and GE has resulted in no disruption in the continuity of supply of consumables to customers.

The intended benefits of this change are also coming to fruition with the Nanosonics direct team selling the significant majority of all new installed base during FY22 Q4 as well as driving upgrade adoption in the same period.

While Nanosonics' direct operations will be responsible for the significant majority of all capital sales and 100% of consumables sales moving forward, the capital reseller agreement with GE Healthcare has been extended for a further 12 months. Our respective teams continue to collaborate to ensure the infection prevention needs of customers and their patients are met.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Nanosonics Limited. The Motley Fool Australia has positions in and has recommended Nanosonics Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Healthcare Shares

a biomedical researcher sits at his desk with his hand on his chin, thinking and giving a small smile with a microscope next to him and an array of test tubes and beackers behind him on shelves in a well-lit bright office.
Healthcare Shares

Broker says this ASX 200 biotech stock is a top buy

Let's see what Bell Potter is saying about this biotech.

Read more »

Cropped shot of an attractive young female scientist working on her computer in the laboratory.
Healthcare Shares

Why CSL shares are a buy today despite the looming Trump tariffs

A leading expert believes CSL shares are still trading for a bargain today. Here's why.

Read more »

A businesswoman pulls her glasses down in shock to look at the bad news on her computer.
Healthcare Shares

Why did the Telix share price just crash 16%?

Investors are sending the Telix share price plunging today. But why?

Read more »

Broker analysing the share price.
Healthcare Shares

Expert: 2 ASX healthcare stocks to avoid before reporting season

Not all healthcare stocks are created equal.

Read more »

A group of people in a corporate setting do a collective high five.
Healthcare Shares

Should I buy Pro Medicus or CSL shares ahead of earnings season?

The ASX healthcare sector may be currently undervalued.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Healthcare Shares

Why Mesoblast shares can keep storming higher

More big returns could be on the way for buyers of this high risk stock according to Bell Potter.

Read more »

Doctor doing a telemedicine using laptop at a medical clinic
Healthcare Shares

The Mesoblast share price just rocketed 38%! Here's why

ASX investors just sent the Mesoblast share price up 38%. But why?

Read more »

couple having a happy discussion with a banker
Healthcare Shares

Expert: 4 ASX healthcare stocks to buy ahead of reporting season

Could these ASX healthcare stocks be good additions to your portfolio?

Read more »