Why is the Nanosonics share price crashing 12% today?

The Nanosonics Ltd (ASX: NAN) share price is having a day to forget on Monday.

In morning trade, the infection prevention company’s shares are down 12% to $4.03.

Why is the Nanosonics share price crashing?

Investors have been hitting the sell button on Monday after brokers responded negatively to the company’s recent trading update.

One of those brokers was Goldman Sachs, which has reiterated its sell rating and $3.50 price target on the company’s shares.

Goldman highlights that Nanosonics has started FY 2023 positively in respect to sales but elected not to comment on its operating costs or earnings. It said:

As expected, there was no update on Opex at the 4m mark, which remains a key question following the sharp increase in headcount and operational infrastructure required for the new US distribution model. As a reminder, FY23 opex guidance of +15-18% surprised consensus to the upside at the time (following the +28% growth in FY22, which had already included some pull-forward), and was a key driver of our -50-130bps EBIT margin revisions in August.

Overall, whilst capital revenue continues to run ahead of our expectations, we are less clear on the near/long-term consumables trajectory and the cost/margin profile, and we make no changes to our forecasts (FY23E revenue/EBIT $153m/$10m).

What else?

Over at Morgans, the broker has downgraded Nanosonics’ shares to a hold rating with a $4.91 price target.

Its analysts made the move on valuation grounds following a strong gain by the Nanosonics share price over the last five to six weeks. It explained:

We recently upgraded our forecasts reflecting favourable currency moves and sit slightly above NAN’s recent revenue guidance range of growth of 20% to 25%. Although the year has started well for NAN with revenue up 42%, we prefer to wait until the 1H23 results before adjusting any forecasts.

As a result our target price remains unchanged at A$4.91 and given the recent share price strength we move to a Hold rating (from Add).

Though, with the Nanosonics share price now trading sharply below this price target, it is possible that Morgans’ analysts may soon see value emerging again.

The post Why is the Nanosonics share price crashing 12% today? appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nanosonics Limited. The Motley Fool Australia has positions in and has recommended Nanosonics Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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