BrainsWay BWAY shares plunged 15.7% in the past four trading sessions, falling below the 50-day moving average, implying weakness in the stock. Meanwhile, BWAY is scheduled to release its fourth-quarter results on March 11. The company is expected to register 20% and 200% year-over-year growth in sales and earnings per share (EPS), respectively.
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Although the company turned profitable in 2024 and is expected to continue its strong business momentum in the fourth quarter as well, BWAY shares seem unable to break above the IPO price. BWAY shares tumbled in the past when they reached near the IPO level in January 2020 and July 2021. The recent fall in its share price is likely a technical event, taking resistance at the IPO level, but it may also imply a lower-than-expected performance during the fourth quarter.
BWAY shares have been up 4.6% so far this year, underperforming the Zacks Medical Products sector’s growth of 10.8% but outperforming the S&P 500 Index’s 1.4% rise.
However, BrainsWay shares still trade above the 200 SMA mark. In the year-to-date period, BWAY stock has underperformed its peers Medtronics plc’s MDT 12.8% rise and Neuronetics, Inc’s. STIM more than 170% surge.
BWAY's YTD Price Performance
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Meanwhile, BrainsWay is expanding its global presence with 15 new Deep Transcranial Magnetic Stimulation (“TMS”) system placements in Taiwan and South Korea. In the third quarter, BWAY reported 26% year-over-year revenue growth and raised its full-year guidance to $40-41 million. A $20 million investment from Valor Equity Partners aims to enhance market awareness and data analysis. Additionally, Israel's Ministry of Defense approved Deep TMS therapy reimbursement for post-traumatic stress disorder (PTSD) patients.
Let’s delve deeper and figure out the best course of action for your portfolio regarding BWAY stock.
Recent Developments Propelling BWAY’s Growth
Significant US Expansion: In September 2024, BrainsWay made a breakthrough in the U.S. market by expanding its Deep TMS platform across the East Coast. A large mental health network placed an order for 14 new Deep TMS systems, significantly increasing the company's presence in the region. This expansion aligns with the rising demand for non-invasive mental health treatments and highlights BrainsWay’s growing acceptance among healthcare providers. The move strengthens its revenue streams and reinforces its leadership in TMS technology for mental health disorders.
Positive Clinical Data for Chronic Pain Treatment: In November 2024, BrainsWay released promising feasibility data from a study evaluating Deep TMS therapy for chronic peripheral neuropathic pain. The study found that patients receiving Deep TMS treatment experienced significant reductions in pain, anxiety and depression symptoms, suggesting a potential breakthrough in the management of chronic pain. With millions suffering from neuropathic pain worldwide, this data boosts BrainsWay’s credibility in expanding Deep TMS applications beyond mental health. If further studies confirm these findings, it could open doors to new regulatory approvals and a broader market reach.
Advancements in Addiction Treatment: In December 2024, an independent pilot study at Stanford University showed that an accelerated Deep TMS protocol had a positive impact on alcohol use disorder (AUD) patients. The study demonstrated improved treatment outcomes, indicating that Deep TMS could be a viable option for addiction therapy. As a result of this breakthrough, the National Institutes of Health awarded a $1.5 million grant to investigate Deep TMS’s effectiveness in treating AUD. This development positions BrainsWay as an innovator in addiction treatment, expanding its market potential in the growing neurostimulation-based rehabilitation sector.
BWAY Trades Between 50 and 200 SMA
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BWAY’s Long-Term Growth Prospects
Expansion of Deep TMS Applications Beyond Mental Health: BrainsWay's Deep TMS technology is already FDA-cleared for depression, OCD and smoking addiction, but its potential extends far beyond these areas. Ongoing research into chronic pain, PTSD, bipolar disorder and addiction treatments could significantly expand its addressable market. As the company continues clinical trials and secures additional regulatory approvals, its technology could become a widely adopted alternative to pharmaceuticals for various neurological and psychiatric conditions, leading to sustained revenue growth.
Growing Global Mental Health Awareness & Market Demand: The demand for non-invasive, drug-free mental health treatments is on the rise due to increasing cases of depression, anxiety and addiction disorders worldwide. The global neurostimulation devices market is projected to witness a 12.8% CAGR through 2030, with TMS therapy gaining mainstream adoption as an alternative to medication. BrainsWay's expanding global footprint, including new placements in the United States, Taiwan and South Korea, positions it well to capitalize on this trend and drive long-term revenue growth.
Strategic Partnerships & Insurance Coverage Expansion: BrainsWay's ability to partner with large healthcare networks, private clinics and insurance providers is key to scaling its business. More insurance reimbursements for Deep TMS treatments, like the recent approval from Israel’s Ministry of Defense for PTSD therapy, can boost patient accessibility and increase adoption rates. As more insurers recognize Deep TMS as a standard treatment, its affordability and accessibility will improve, leading to higher patient volume and recurring revenue for the company.
Key Challenges for BrainsWay
BrainsWay operates in a highly competitive neurostimulation market, facing strong competition from companies like Neuronetics, Medtronic and Abbott ABT. While BrainsWay specializes in Deep TMS technology, competitors like Neuronetics dominate the traditional TMS market, and Medtronic & Abbott have broader neuromodulation portfolios with larger research and development budgets. Competing against these well-funded companies for market share, hospital contracts and insurance coverage remains a significant challenge.
Additionally, expanding Deep TMS for new treatments like chronic pain, PTSD and addiction requires FDA approvals and clinical validation, which are time-consuming and expensive. Insurance reimbursement policies for TMS treatments vary across regions, limiting patient accessibility.
Valuation Concerns Persist for BWAY
BWAY stock is currently trading at a premium compared to the Medical Products industry. Although Its forward 12-month P/S of 3.88X is lower than the industry’s 6.27X at this moment, the company is trading above its median indicating a higher valuation. Though rising valuation indicates high expectations for growth, the company's near-term prospects remain somewhat muddled.
Price-to-Sales Forward Twelve Months (F12M)
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Conclusion: Hold BWAY Stock for Now
For now, retaining BrainsWay stock, carrying a Zacks Rank #3 (Hold), seems the most prudent strategy for existing investors due to the company’s expansion of its Deep TMS applications, increasing market demand and a Growth Score of A. However, as for fresh investment, we would like to recommend investors add the stock to their watchlist and wait for a better valuation as the stock has a Value Score of D showing overvaluation. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
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