What happened

Shares of Zynex (NASDAQ:ZYXI) were tanking 26.5% lower as of 11:20 a.m. EDT on Monday. The big decline came after the medical technology company announced lower-than-expected orders for the third quarter and lowered its third-quarter revenue estimate because of the impact of the COVID-19 pandemic.

So what

Today's sell-off might seem like an overreaction. After all, Zynex still expects that its orders in Q3 will increase 96% year over year and 87% from the previous quarter. The company's Q3 revenue estimate is now between $20 million and $20.5 million. While that's down from the previous guidance range of $22.3 million to $22.8 million, it reflects a decrease of only 10% at the midpoints of the ranges.

Businessman looking at red line crashing through the floor

Image source: Getty Images.

Zynex also still expects that its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) will be between $2.3 million and $2.8 million, in line with its previous outlook. The company projects that full-year 2020 revenue will be between $80 million and $81 million, within its previous guidance of full-year revenue between $80 million and $85 million. 

The problem for Zynex, though, is that its valuation is priced for perfection. The healthcare stock trades at nearly 44 times expected earnings. Any bad news is likely to take a toll when a stock trades at such a lofty level.

Now what

In the short term, the main thing to watch with Zynex is how the COVID-19 pandemic might continue to impact its order growth. Over the longer term, though, the company's expansion of its sales force could pay off in higher revenue.