Hologic’s stock rating was cut to “neutral” from “buy” at BTIG, which cited larger economic trends that also are affecting others in the medtech industry such as the continuing supply chain challenges and waning COVID-19 testing demand.
A Monday research note listed supply issues like the shortage of semiconductor chips as the company's top challenge, and it specifically highlighted the impact on Hologic’s breast health business. BTIG analyst Ryan Zimmerman wrote that the supply chain environment likely will get worse before it improves.
Even if the company is able to get semiconductor chips, Hologic management told BTIG that there are quality control and processing hurdles that could delay the availability of certain products, according to the report.
“In short, we expect continued disruption in Breast Health sales and limited upside to expectations as the supply environment has not materially improved,” Zimmerman wrote.
BTIG also cited challenges such as increasing operating expenses and a drop in demand for COVID-19 testing, which also is affecting other diagnostic companies in the industry. The analyst said that the drop in COVID testing removes an offset for “softer womens' wellness visits and elective gynecological surgery.”
Hologic last quarter reported that revenue decreased by 6.6% to $1.44 billion from a year earlier, mostly because of a drop in COVID-19 testing sales.
Zimmerman wrote that while Hologic is “a well run company with an impeccable balance sheet,” the downgrade is largely due to macroeconomic trends that are limiting visibility to how the company will perform in 2023.
Hologic is scheduled to announce results for its latest quarter on July 27.