Shares of Nano-X Imaging (NNOX +1.16%) are down about 53% over the past 12 months, and it's not hard to understand why. The company generated a lot of buzz when it earned Food and Drug Administration (FDA) clearance to market the Nanox.ARC a little over a year ago, but sales haven't grown.
Nanox.ARC's U.S. launch isn't proceeding as quickly as investors had hoped, but some investors were encouraged by one of its investors. In February, Nvidia (NVDA +0.21%) disclosed that it has 59,632 shares of Nano-X stock in its portfolio.
NASDAQ: NNOX
Key Data Points
Is Nano-X a good stock to buy on the dip? Here's what you should know before taking a chance on this stock.
Reasons to buy Nano-X stock
Using computer-aided tomography (CAT) to splice together hundreds of individual X-ray images is a practice that's been around for five decades. Computers are more efficient these days, but the X-rays modern CAT scans need to function are still produced with ultra-high-wattage bulbs that can cost thousands to replace.
The Nanox.ARC employs proprietary technology that produces X-rays with far less electricity, which should reduce the cost of images. At the moment, Nanox.ARC is intended to be used by trained radiographers in professional healthcare facilities. With their relatively low power requirements, though, Nanox.ARC devices could, in theory, be used in a wider variety of settings.
In addition to its next-generation imaging device, Nano-X is marketing Nanox.AI, a suite of products that apply artificial intelligence (AI) to existing images to identify patients with chronic conditions. With robust AI-assisted radiography services, Nano-X could boost the accessibility of three-dimensional imaging services to areas where trained radiologists are in short supply.
Reasons to avoid Nano-X stock
Sending CAT scans to offsite radiologists is already standard practice for cost-conscious hospitals. Nano-X's financial results suggest its attempt to reinvent the wheel isn't resonating with healthcare providers. The FDA cleared Nanox.ARC for musculoskeletal imaging on May 1, 2023, but total revenue during the first quarter of 2024 rose just 4% year over year to $2.55 million.
In Q1, Nano-X sold just $48,000 of imaging equipment. Revenue from the AI solution it acquired in 2021 reached just $97,000 with a gross loss of $2 million. In other words, the company could easily save about $8 million annually by shutting down its AI solution.
Nano-X finished March with just $44.9 million in cash after losing over $12 million in Q1. If management can't make big improvements soon, it could end up raising capital with a dilutive share offering that makes it nearly impossible for long-term shareholders to realize any gains.
NASDAQ: NVDA
Key Data Points
About Nvidia
Nvidia is the leading manufacturer of semiconductors that power AI applications. Unfortunately, Nano-X investors should not consider Nvidia's stock holdings a direct endorsement of this company's AI-related ambitions.
Back in 2017, Nvidia invested in a company called Zebra Medical, which was focused on using AI to interpret medical images. Nano-X acquired Zebra in 2021 using shares, not cash, to complete the deal.
Nano-X investors could find encouragement in the fact that Nvidia didn't sell its Nano-X shares following the Zebra acquisition. I wouldn't read too much into the insignificant holding, though. Nvidia's market value is up around $2.7 trillion, while its Nano-X shares are worth less than an average 3-bedroom house in California.
It's not a buy now
Nano-X's device may be able to produce X-rays at a lower cost than traditional sources, but the company still hasn't found a way to turn Nanox.ARC into a sustainable business. It's probably best to keep this stock on a watchlist, not in your portfolio, until after it can demonstrate profitability.
