Too Much Uncertainty Surrounding MiMedx Group Inc (MDXG) Stock; Needham Downgrades to Hold

Needham's Michael Matson warns that there's too much uncertainty surrounding MDXG for him to stay bullish.

It’s safe to assume that today is a day MiMedx Group Inc (NASDAQ:MDXG) investors would rather forget. Shares of the medical-device maker are down nearly 40%, after the company announced that it is delaying its fourth-quarter results and its 10-K filing and that is has engaged independent legal and accounting advisers to conduct an internal investigation. Despite this, management noted that the investigation should not have a material impact on its revenue guidance for 2018.

At least one Wall Street analyst has had enough. Needham analyst Michael Matson downgraded MiMedx shares, knocking his rating from Strong Buy to Hold, while removing his price target, which had been $21. (To watch Matson’s track record, click here)

Where do we go from here? The analyst answers: “Until the investigation is complete, we expect MDXG shares to trade at a steep discount as investors heavily discount the prior financials. If the investigation finds no wrongdoing, MDXG shares are likely to react positively, although we are skeptical they can command the previous multiple. On the other hand, if the investigation does find serious issues, we think it could result in further turmoil potentially including; management changes, and SEC fines/penalties leading to weakness in the stock. Timing of the investigation is hard to predict, but we suspect it could last several months or longer. Finally, while MDXG could become an acquisition target, we think this is highly unlikely until accounting issues and an SEC investigation are resolved.”

“Given increased uncertainty and risk, we can no longer recommend that investors buy MDXG shares,” the analyst concluded.

MiMedx certainly has the Street divided. Based on 4 analysts polled by TipRanks in the last 12 months, two rate a Buy rating on MiMedx stock, one issues a Hold rating, and one recommends a Sell. The 12-month average price target stands at $18, marking over 100% upside from where the stock is currently trading.

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