Shares of Transmedics Group (TMDX 3.54%) sank over 20% this week, according to data from S&P Global Market Intelligence. The organ transplant disrupter announced a CFO transition and reduced the range for its full-year 2024 guidance, indicating slowing revenue growth. As of 1:54 p.m. ET on Friday, Dec. 6, Transmedics stock is down 60% from all-time highs set just earlier this summer.
Here’s why Transmedics Group stock has been falling once again.
CFO transition, guidance reduction
On Dec. 2, Transmedics announced that its CFO, Stephen Gordon, would be retiring and that Gerardo Hernandez would take over the position. Investors typically do not like it when CFOs leave, which could be why Transmedics stock is falling this week. However, Hernandez looks like an experienced person for the role, with 25 years in the healthcare and consumer packaged goods sectors.
The more concerning development was Transmedics’ updated guidance for 2024. The company now expects revenue of $428 million to $432 million in 2024, which narrows and lowers its prior guidance of $425 million to $445 million. While this new guidance equates to over 75% revenue growth for the full fiscal year, the company has been going through a big revenue slowdown in recent quarters. If the company hits the low end of its guidance — $428 million — Q4 revenue will be $108 million. This is exactly what Transmedics generated in the third quarter and is actually lower than the $114 million it generated in the second quarter of 2024.
As a growth stock, investors are expecting fast revenue growth out of Transmedics. With this rapid revenue growth slowdown, it is no surprise to see the stock faltering yet again this week.
Should you buy Transmedics stock?
Temporary slowdowns can sometimes provide buying opportunities for investors focused on the long term. Is that the case with Transmedics Group? The company’s market cap has now fallen to $2.3 billion, which almost makes it a small-cap stock once again. The organ transplant market is growing, and Transmedics clearly has found a market fit for its end-to-end solution that safely transports organs for surgery around the country.
The stock is not dirt cheap based on this revenue guidance, but the company is starting to flip to profitability, having generated $31 million in operating income over the past 12 months. If you believe in the Transmedics Group growth story, now could be a good time to scoop up some shares of this former growth darling.
Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends TransMedics Group. The Motley Fool has a disclosure policy.
