1 'Strong Buy' Growth Stock Wall Street Expects to Soar Around 70%

Biotechnology is an industry with many areas that have yet to be explored. With artificial intelligence (AI) advancements, the industry can now delve deeper into previously unexplored areas in science and medicine - and at a faster pace, too.

As a result, the biotech space is brimming with growth stocks. Alphatec Holdings (ATEC) stands out for its innovative spinal surgery solutions, and the company has attracted the attention of investors looking for growth opportunities in the medical device industry. Driven by its efforts to revolutionize spine surgery, the stock has returned around 410% in the last five years, massively outperforming the S&P 500 Index’s ($SPX) gain of 77%.

This year, however, the stock has gotten off to a slow start, falling 10.6% year-to-date, despite management's optimistic forecast for 2024. Nonetheless, Wall Street expects a turnaround, with projections calling for the stock to rise by as much as 68.5% in the next 12 months. Let’s find out more. 

About Alphatec Holdings

Alphatec Holdings (ATEC) is a medical technology company largely focused on designing, developing, and marketing products necessary for spine surgeries. The company's portfolio includes a variety of products designed to address various spinal conditions, as well as advanced tools to help surgeons improve procedure precision and efficiency in spinal surgeries. Some of the company's advanced technologies include Prone Transpsoas (PTP), a minimally invasive spinal fusion surgery, Posterior Cervical Fusion (PCF), a spine stabilization procedure, and Posterior Lumbar Interbody Fusion (PLIF), among others.

The company has reported consecutive quarters of revenue growth, thanks to increased product adoption and market expansion. Last year, Alphatec expanded its portfolio by introducing 15 new products and line extensions. The strength of the portfolio, according to the management, contributed to a successful 2023. Total revenue in 2023 increased 37% year-on-year to $482 million.

Tailwinds For Alphatec

Alphatec is currently not profitable, but it is on track to become profitable. Alphatec faces competition in the medical device market from larger players such as Intuitive Surgical (ISRG), Stryker (SYK), Globus Medical (GMED), and Medtronic (MDT). However, its exclusive emphasis on spinal surgery gives it a competitive advantage. In 2023, Alphatec trained over 500 surgeons. Hospitals spend a lot of money to train their surgeons on these systems. As a result, Alphatec benefits from the high switching costs faced by hospitals.

Between 2019 and 2029, the global spine surgery market is expected to grow at a compounded rate of 4.5%. This represents a significant growth opportunity for Alphatec, aided by factors such as an older population, the growing number of spinal issues, and breakthroughs in technology. 

And according to the World Obesity Atlas 2024, roughly 1.5 billion individuals worldwide may be obese by 2035. Obesity increases the risk of spinal disorders, contributing to market growth.

Alphatec is well-positioned to capitalize on this rising demand by constantly innovating and expanding its product line. In 2023, the company spent $70 million on research and development, up 59% from 2022. Alphatec's cash and cash equivalents totaled $220.9 million by the end of 2023.

In April of last year, Alphatec acquired the REMI Robotic Navigation System to integrate navigation and robotics into its systems. More recently, in October, the company announced plans to launch the Calibrate LTX lateral expandable implant system, which will help surgeons achieve the most important goal of spinal surgery: alignment.

At the rate at which the company’s revenue continues to grow, profitability is not out of reach. The company expects revenue of $595 million and positive adjusted EBITDA of $22 million in 2024. Analysts predict Alphatec’s revenue will jump by 23.4% to $595.5 million in 2024, in line with management’s predictions. Revenue could further increase by 19% in 2025. Furthermore, analysts predict that the company's losses will continue to decline by 2025.

Trading at three times forward 2024 projected sales, ATEC stock is quite cheap for a growth stock with outstanding potential in the spine surgery market.

What Is The Stock Price Prediction For Alphatec Holdings?

Recently, Needham analyst David Saxon reiterated his “strong buy” rating for ATEC, citing the potential for increased revenue growth. The analyst anticipates that management will most likely set a revenue target of $1 billion by 2027, which he believes Alphatec will easily exceed. Saxon has a price target of $19 for ATEC. Furthermore, Wells Fargo also maintained its “buy” rating and price target of $26 for ATEC.

Overall, Wall Street rates Alphatec stock as a "strong buy.” Of the 11 analysts covering ATEC, 10 have rated it a “strong buy,” and one recommends a “moderate buy.” Based on its mean price target of $22.77, Wall Street expects the stock to climb as high as 68.5% from current levels. Furthermore, its high target price of $32 implies a potential upside of nearly 137% in the next 12 months. 

The Bottom Line on Alphatec Stock

The global medical devices market is expected to reach $134.6 billion by 2030, growing at a compounded annual growth rate of 11.3%. Intuitive Surgical, the maker of da Vinci robotic systems, has long held a monopoly on the robotic surgery market. ISRG stock is quite expensive, trading at 63 times forward earnings. However, Intuitive is profitable and has delivered impressive returns to investors.

While Alphatec is a more affordable option, it is also unprofitable. Until the company turns a profit, investors should be cautious. However, the company is exhibiting tremendous potential and has a wide range of opportunities in the medical device market. As such, starting with a small stake in Alphatec would be a wise move for the time being.