Short Seller Muddy Waters Drops Bomb on Inogen

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Medical device maker Inogen Inc. (NASDAQ: INGN) has “created an egregiously false narrative” regarding the size and growth of the company’s market according to short seller Muddy Waters LLC. The firm has set a price target on the stock of $46, about 67% below Thursday’s closing price of $139.74.

In its report, Muddy Waters cites Inogen’s claims that its total available market is 3 million users and that user growth falls between 7% and 10% annually. Those numbers, Muddy Waters asserts, “appear to have little grounding in reality.”

The firm says that its own calculation of Inogen’s total addressable market is 1.3 million, less than half the company’s number, and is based on data from Centers for Medicare & Medicaid Services (CMS). The short seller says that CMS data indicate that the oxygen therapy market is shrinking and that between 2010 and 2017 the market has shrunk at a compound annual rate of 2.6%.

Muddy Waters expects Inogen sales to peak no later than 2020 and that while total portable oxygen concentrator sales may continue to rise, sales to business-to-business customers are likely to decline due to the six-year usable life of the devices. The firm does not see the Chinese market riding to the rescue either. As a result, Muddy Waters says there is “no justification for an 8x sales multiple, let alone any valuation based on a sales multiple.” Ouch.

Inogen has not commented on the Muddy Waters report which is available a the firm’s website.

The medical device maker’s stock traded down about 2.5% at $136.29 in the late afternoon Friday. The stock’s 52-week range is $110.51 to $287.79 and the consensus 12-month price target is $231.20, a far cry from where Muddy Waters think it belongs.

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