Shares of Hinge Health, Inc. (HNGE) tumbled 12.26% in pre-market trading on Wednesday, extending a sharp decline that began after the company's third-quarter earnings release. This significant drop comes despite the company reporting better-than-expected results, highlighting investors' focus on concerns about future growth prospects and profitability sustainability.
For the third quarter, Hinge Health reported a loss of $0.02 per share, significantly better than the FactSet consensus estimate of a $0.15 loss. Revenue surged 53% year-over-year to $154.2 million, surpassing analysts' expectations. The company also highlighted strong client growth, with the number of clients increasing 25% to 2,560 compared to the same period last year. Additionally, Hinge Health raised its full-year 2025 revenue guidance to between $572 million and $574 million, representing 47% growth at the midpoint.
However, the market's negative reaction suggests that investors are more concerned about the company's decelerating growth rate and the sustainability of its profitability. While the 53% revenue growth is impressive, it marks a slowdown from previous quarters. The company's guidance for the fourth quarter implies further deceleration, with projected revenue growth of 33% at the midpoint of the $155 million to $157 million range. This trend of slowing growth, coupled with concerns about the sustainability of profitability improvements in light of substantial stock-based compensation expenses, appears to be driving the negative market reaction, overshadowing the otherwise strong financial results and recent analyst target price increases.
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