Why Transmedics Plunged in December

Shares of Transmedics (NASDAQ: TMDX) fell 28.1% in December, according to data from S&P Global Market Intelligence.

The stock was already down significantly from its highs heading into the month following a weaker-than-expected October earnings report, so December events added insult to injury. Here's what happened to the former high flier.

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A cruel December

On Dec. 2, Transmedics announced it had appointed Gerardo Hernandez as CFO, replacing current CFO Stephen Gordon effective immediately. Gordon will stay on in a nonexecutive role until March 2025, then act as an advisor to the company through March 2026.

In the same press release, Transmedics also narrowed fourth-quarter revenue guidance to a range of $428 million to $432 million, which is at the lower end of its prior October guidance of $425 million to $445 million.

The new guidance was a touch below expectations and would mark just 35% growth over the prior-year fourth quarter. That's actually a big deceleration from the triple-digit growth Transmedics had been posting up until its third-quarter miss.

Needless to say, a revenue "miss" in conjunction with management turnover, which is rarely viewed favorably, caused a significant sell-off to end the year.

Opportunity or an ominous sign?

Transmedics finished the year down roughly 65% from its all-time highs just last August. However, the stock rose nearly 10% yesterday on the back of two analyst opinions that the hate has gone too far.

Management ascribed the slowdown to a sequential decline in overall U.S. organ transplant volumes in the third quarter, not any loss of competitive position. On its October call, CEO Waleed Hassanein said, "There is no clear reason for these declines other than normal variability of donor availability and potential summer seasonality."

The company still sees itself taking market share thanks to its novel Organ Care System, which provides oxygen and nutrients to organs during transport, providing better outcomes over freezing organs in cold storage.

This may be the case, but it's odd to see transplant volumes decline overall when organ transplant volumes generally increase over time.

At its Dec. 10 analyst day, management forecast 29% annualized growth through 2028, which would grow revenue from $430 million this year to $1.2 billion by then. If that happens, then Transmedics' stock looks pretty cheap. Still, the fact that the stock remained down through December even after that presentation suggests investors remain skeptical.

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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends TransMedics Group. The Motley Fool has a disclosure policy.