By:
Erik Olson, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
• Inogen Inc. (NASDAQ:INGN) develops, manufactures, and markets
portable oxygen concentrators designed to deliver supplemental oxygen therapy
to individuals with chronic respiratory conditions.
• The Inogen One G5 is
expected to be released in the first half of 2019.
• Q4 sales were adversely
affected by a slowing purchasing pattern of a large national provider.
• A legal investigation
was launched by a law firm on behalf of shareholders due to possible federal
securities laws violations.
• The POC market is still
underpenetrated leaving room for Inogen to grow.
Key
points:
Inogen is expected to release the Inogen One G5, a
light weight portable oxygen concentrator. While the exact weight has yet to be
determined, it is expected to have an O2 capacity of 1,260 ml/min.
Additionally, the machine is expected to have a battery duration longer than
the Inogen One G3 which could run for up to 10 hours on a double battery.
Q4 sales were adversely
affected by a slowing purchasing pattern of a large national provider. The
company has stated that this was due to a transitory period of infrastructure
restructuring and not any long-term economic or competitive dynamic. Although,
it is unlikely the customer will increase purchases in the near term.
The Law Offices of Howard
G. Smith announced an investigation concerning the company and its officers’
possible violations of federal securities laws. This investigation was launched
on behalf of Inogen’s shareholders. This investigation is in regard to an
earnings call held back in February.
The portable oxygen
concentrator market remains underpenetrated. Based on Medicare claims data from
2017, the penetration rate was approximately 11% but it is estimated that full
penetration is around 65%. This leaves room for large gains in market share for
Inogen. It is estimated that the market will reach full POC penetration in 5+
years.
What
has the stock done lately?
Inogen’s stock price took
a big dip in February after management backtracked on their total addressable
market numbers. A revision of 2019 guidance was also issued and shares fell
more than 24%. Inogen continues to tumble as the stock is currently trading at
$90.12, down from $123.22 at the start of the year.
Past
Year Performance:
Inogen’s stock price is down almost 40%
from a year ago. However, it gained significantly throughout the past year
before further tumbling. It hit a 52-week high in September and is currently
trading near its 52-week low, almost 70% lower than its peak.
1-Year vs. Russell
2000
Source:
Bloomberg
My
Takeaway:
I believe with the huge
tumble in price over the past year, Inogen is currently trading at a discount
to its intrinsic value. The company will continue to stay competitive by
further investing in innovative product offerings. Additionally, the large
opportunity for growth in the industry will allow the company to continue to
grow. Large fixed and variable costs associated with oxygen tank delivery
further adds to the attractiveness of Inogen’s product offerings. The continued
expansion into the underpenetrated POC market will also add to Inogen’s value.
1-Month Chart
Source:
Bloomberg