NovaBay Pharmaceuticals, Inc. (NYSE-Amer: NBY) shares are in rally mode, reaching $0.82 intraday on Tuesday, 31% higher from where they started in June. While the move is impressive, an analyst at Ascendient Capital expects significantly more upside may be in play. In fact, he models for an over 1346% increase from current levels to $12 a share after factoring in expected revenue increases, aggressive cost cutting, and faster market penetration by its innovative consumer eye, skin, and wound care products. (* share price from NASDAQ.com, 6/27/23, 9:52 AM EST)
Reaching that uber-bullish $12 price target may not be an overzealous proposition, considering that NBY's value drivers target markets that are surging in size, present massive revenue-generating potential and that NovaBay is ideally positioned to effectively reach its target audience with a diverse and growing products portfolio. But perhaps the most important consideration to the bullish thesis is knowing that NBY is focused on the right markets at the right times.
They are also penetrating these markets with the right products; innovative, best-in-class products, including its highly regarded Avenova-branded eye care, DERMAdoctor skin care, and PhaseOne wound care products. These products are more than value drivers; they diversify NovaBay's market presence, create multiple income streams, and position the company to capture a significant share of several high-value consumer markets.
A Sum Of Its Parts Appraisal
That collective revenue-generating strength is what exposes the value proposition. And trading at just $0.85 on Tuesday, it may be one too good to ignore. Again, not an overzealous presumption, considering NovaBay makes its own case by showcasing impressive products that are more than excellent; they are accelerating NBY's pace of penetrating high-dollar markets. That includes the one in play from its exceptional eye care products, including clinically proven Avenova® Antimicrobial Lid & Lash Solution, which eye-care professionals prescribe for blepharitis and dry-eye disease. Indeed, Avenova's efficacy and popularity are not unnoticed. That recognition has led to a strategic partnership with Eyeganics to sell OTC Organic Tears on Avenova.com. These tears, certified as 100% organic and preservative-free by the USDA, offer a simple and refreshing solution for dry eyes.
But the value isn't only contributed to by the innovative, all-natural product. The packaging technology, in and of itself, is a value driver with the potential for separate monetization. The design allows for more than 250 drops per bottle, an appreciable difference over competing packaging. And specific to its product, providing a cost-effective and convenient advantage over other preservative-free artificial tear products. Appreciate the market opportunity in play.
NovaBay's eye care line gives them a presence in the $68 billion global ophthalmic therapeutics market. And with its products formulated with differences that create advantages, NBY is in a sweet spot of opportunity supported by a growing demand for all-natural, affordable, organic care products. The better news is that the demand curve is steepening, with a shift in consumer preferences driving companies to find better, safer, all-natural ways to provide prescription-based and self-medicated care. In that respect, NovaBay has a head start, is ahead of the trend, and can meet a new generation of tastes and preferences through a product portfolio that checks the right boxes to ensure continued growth.
More good news- NBY's eye care products aren't the only value drivers.
Skin and Wound Care Market Also In-Play
In addition to its eye care line, NovaBay is capitalizing on revenue-generating opportunities from its products targeting the skin and wound care sectors. They have already announced a significant deal, fulfilling a substantial order for its NeutroPhase Skin and Wound Cleanser from China Pioneer Pharma Holdings, Limited, a prominent importer and marketer of branded pharmaceuticals and medical devices in China. That deal opens the door to penetrating a massive overseas market, putting potentially hundreds of millions in revenues in play over the next 12 months. That's speculative, but markets do trade with a forward-looking bias. And part of the Ascendiant model is based on generating new revenues from large markets. In other words, with these NBY products again presenting a better competitive profile, thinking big may be the appropriate response. Similarly, differences are advantages.
NovaBay's NeutroPhase stands out for its superior purity, benefits, and gentleness on the skin and tissue. That's intentional. Unlike many competing products, including those from Johnson & Johnson (NYSE: JNJ), Bristol Myers Squibb (NYSE: BMY, and Merck (NYSE: MRK), NeutroPhase does not contain toxic chemicals, making it the preferred choice among healthcare professionals. Adding to its appeal is its efficacy in killing bacteria and eliminating biofilm, a significant obstacle in wound healing. That advantage puts NBY in an enviable position to capitalize and, more important, from a company and investor's perspective, monetize its opportunities from PhaseOne more quickly.
Reaching that consumer, which they are doing, can generate substantial rewards. The global wound care market is expected to become a $30.2 billion rev-gen opportunity by 2032. But along the way, billions are still in play. In other words, being early to this massive market opportunity is an advantage. And NBY does more than check that box; it can leverage its products' strength and best-in-class profile to cost-effectively penetrate both domestic and international markets. Reading between the lines of its announced deal with China Pioneer Pharma Holdings, additional value-creating agreements could be in the queue. There's more to like.
DERMAdoctor® Earns A Massive Market Intro
NovaBay successfully expanded its product offerings into the high-dollar skin care and treatment markets after launching DERMAdoctor® Comfort + Joy Psoriasis Therapeutic Moisturizing Cream. This strategic diversification does more than open NBY to a new large market; it's expected to contribute meaningfully to NovaBay's revenue streams and expedite the seizing of additional opportunities to penetrate a lucrative global skincare market. They have an excellent start to that mission.
Dr. Audrey Kunin, Chief Product Officer, and a board-certified dermatologist, introduced this innovative product line on the QVC network, showcasing its effective treatment and relief for individuals with psoriasis. Like its other target markets, this one presents multi-million dollar revenue-generating potential. Psoriasis affects approximately 125 million people worldwide, including nearly 8 million individuals in the United States alone. Extrapolating that to dollar terms, psoriasis presents a global treatment opportunity exceeding $50 million at last check. Meeting that with better products makes the difference. NBY checks that box as well. Again, differently.
Focusing on the challenges faced by psoriasis patients, NovaBay formulated a moisturizing cream with 3% Salicylic Acid and free of steroids and fragrance. That combination provides relief while preventing symptom recurrence, an excellent one-two punch. Here's the better news- the QVC appearance represents a pivotal moment in NBY's history, expected to lead to significant sales and recurring revenues for the company and brand. Better still, those rewards could come sooner than later, noting that QVC tremendously influences product sales and is especially adept at introducing products at times most appropriate to target a specific demographic. An update from NBY regarding sales generated could be imminent from that appearance. If sales post as expected, it could be a milestone of reaching QVC turned catalyst for the stock price.
Appraising The Entirety Of NovaBay Is The Appropriate Formula
Indeed, there are a lot of accretive parts to NBY. And the best way to appraise the company as an investment consideration is to factor in the entirety of revenue-generating opportunities. While any of its products have breakout potential, modeling a share price on just one isn't appropriate to determine fair value. Instead, the best way to appraise NBY is by valuing the sum of its parts and understanding that NBY has the right products to drive rapid growth and increase revenues. Couple that with lowering operational costs, NovaBay leadership is steering a recipe for multi-product market success.
Remember, the $12 price target modeled by Ascendiant Capital is not solely based solely on NBY's current merits. It's forecast knowing and understanding NovaBay's ability and expectation to establish a significant presence in vast target markets, where capturing even a small share can translate into substantial revenues. With an expert management team guiding its path, NBY is undoubtedly on a growth pace shifting from hyper-speed to warp. And through strategic partnerships and an ambitious marketing agenda for 2023, that shift could expedite its share price reaching higher highs faster than many expect.
The rally since June suggests that probability is in play. If so, the open window of opportunity, at what can be best described as ground-floor prices, could soon close.
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