This high-risk investment has just cleared a hurdle to entering the marketplace but still has zero revenue; is Nano X Imaging a buy?
Israeli company Nano X Imaging (NASDAQ: NNOX) is looking to disrupt the x-ray industry with a less-expensive offering and a subscription-based business model. However, the company is facing some hurdles like pandemic-related supply chain issues and FDA clearance on one of its product classes. Should you invest in Nano X Imaging today?
The bull case for Nano X Imaging
The average price of an x-ray machine can be roughly $1,000,000 and the WHO estimates that two-thirds of the world’s population has no access to medical imaging. Nano X Imaging is poised to address both those gaps as its units will have very low upfront costs and it plans to sell the bulk of its units initially to markets in developing nations. The company will use a Medical Screening as a Service (MSaaS) model to bill its clients per scan, which will ensure a steady, recurring revenue stream.
Recently, the FDA cleared the company’s single-source Nano-X.ARC digital X-ray technology, opening the door for clearance of multi-source units, which the company plans to sell. As a new entrant in the space, the company is sure to face some stiff competition but its business model and lower costs are difficult to emulate, giving the company a strong counter-positioning moat. Nano X Imaging utilizes a nanotech cold cathode process that has a longer lifetime than traditional x-rays, further lowering costs for users. Additionally, the units are more efficient, more stable, and require less power than traditional machines.
The company’s management expects to deploy at least 15,000 machines globally by 2024, which could generate roughly $400 million annually. However, analysts have pointed out that this estimate is very conservative as it uses a model that prices only 20 scans per day rather than the global average of 60.
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The bear case for Nano X Imaging
Nano X Imaging generates zero revenue and has a market cap of $1 billion. The company announced in its Q1 report a net loss of $0.27 per share or $0.02 lower than analysts projected. Its stock price tumbled not because of that fact but rather because it announced a delay in its initial shipment of 1,000 multisource units by the first quarter of 2022. Remember, it hasn’t yet received FDA approval for multisource x-rays, it has only started on the approval submission process.
The company has also never manufactured machines at scale so it has zero revenue and zero experience in the field. Some analysts are going so far as labeling Nano X Imaging a vaporware company. Lastly, let us not forget that it is entering an industry with many big players, with names like GE and Siemens already firmly in place and they won’t take to disruption without a fight.
So, Should I invest in Nano X Imaging?
I would reserve a small portion of my portfolio, the ‘risk’ portion, for this company. I feel that it will receive FDA approval for its multisource devices and the company still feels confident that it will meet its target of 15,000 units by the end of 2024. Should that happen, and the company starts generating revenue, be sure to pick up more shares.
1. Who is the CEO of Nano X Imaging?
2. When did Nano X Imaging go public?
August 21, 2020
3. When was the x-ray invented?
1895, by German professor Wilhelm Conrad Röentgen
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