Piper starts Alphatec at OW; PT $7

Piper Jaffray launched coverage of Alphatec Holdings (NASDAQ:ATEC) with an “overweight” rating and $7 price target. The stock closed at $4.80 on Aug. 2.

Alphatec is a pure play spine provider that is introducing a number of compelling technologies, such as nerve monitoring and implants, that we anticipate will capture significant share in this large, $10-billion category in the coming quarters and years, writes analyst Matt O’Brien.

He based his target price on about three times enterprise value to estimated 2020 sales of $122.5-million, assuming about 46 million outstanding shares and $31-million net debt.

“Our conviction is strengthened by Alphatec’s management team, led by industry veteran Pat Miles, who was one of the key executives in building NuVasive from a start-up to 10% share holder in the spine market,” Mr. O’Brien said.

“There are certainly risks to the story, weak end market growth and litigation with NuVasive, but we believe this management team can navigate these issues,” he added.

Mr. O’Brien said shares of Alphatec have climbed meaningfully this year following strong results in recent quarters. “We believe that Alphatec will continue to deliver some of the best growth in all of the spine industry for several years, which should drive the top-line considerably higher and push the stock even higher,” he added.


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