iRhythm Technologies Inc (NASDAQ: IRTC) is a leading US provider of advanced arrhythmia detection solutions. The company is centered around its flagship product known as the Zio Monitor, which uses AI and machining learning algorithms for more accurate detection of abnormal heart rhythms. The lightweight, patch-style Zio XT Monitor was initially introduced to reduce the size of the traditional Holter monitor and enable extended wear time. This was followed by the Zio AT monitor which is the same size but incorporates Bluetooth technology for mobile cardiac telemetry. With the combination of the two products, more efficient detection of multiple arrhythmias can be done to minimize the need for prolonged inconclusive tests.
This is a revolutionary technology in the healthcare space and has given IRTC a strong competitive advantage in the arrhythmia diagnosis market. Along with this, the underlying business has seen healthy growth and momentum and the device return rates have improved. This has enabled IRTC to surpass consensus forecasts in their first quarter sales of $111.4 million. IRTC is now looking to expand its product offerings, with launches of the Zio Monitor, Zio MCT, and international expansions planned for the coming years. With this, the potential growth of IRTC continues to increase.
Furthermore, the growth of the ACM market has also been aided by the increase of consumer wearables such as Apple Watch and Fitbit. They have enabled irregular heartbeats to be detected and resulting in those patients seeking out medical attention. However, it’s important to note that these device are not clinical grade and the FDA approval only refers to their photo plethysmography (PPG) sensor technology and AFib detection algorithms as being non-diagnostic and not replacements for traditional AFib diagnosis and treatment options.
Due to the long-term opportunities and numerous avenues for expansion and profitability, the stock of iRhythm is a strong bullish buy. My December 2023 price target of $170 values shares at 9x 2024E sales, which is a step less than other high-growth S MID-CAP peers. Despite the near-term challenges of possible reimbursement cuts and future competition of alternative form factor devices, I remain optimistic about the long-term potential of this stock as there is still potential room to expand in the core ambulatory cardiac monitoring market with proliferation into adjacent markets.
