Here's Why iCAD Stock Can Climb Much Further

By Larry Ramer

Investor interest was piqued by iCAD’s (ICAD) Jan. 27 positive preannouncement that suggests that a key FDA approval obtained by the firm in November is helping to boost its financial results. 

Meanwhile, the shares of the company whose products utilize AI to detect breast cancer have been rallying in recent days likely because of both the preannouncement and the Street’s recent, belated interest in the prospect of using an AI detector for medical advances. 

With the latter trend likely to continue for an extended period of time and the market for AI in breast imaging expected to grow very rapidly in the coming years, I believe that iCAD’s shares are likely to continue surging for an extended period of time.

Positive Preannouncement and FDA Approval 

The firm reported that it expects its fourth-quarter revenue to come in at roughly $5.1 million to about $5.3 million, much higher than analysts' average estimate of $4.5 million and well above the $4.2 million in sales that it generated in Q3. Those Q4 results are expected on Feb. 26. 

It’s likely that iCAD’s Q4 results may have been lifted by the FDA’s approval in November of its ProFound Detection Version 4.0. According to CEO Dana Brown, the new device "offers a 22% improvement in detecting challenging and aggressive cancers" compared with the prior product and cuts the false positive rate by 18%. 

ICAD’s Momentum Amid Street’s Excitement About AI in Medicine

Comments from Oracle (ORCL) CEO Larry Ellison earlier this month appear to have made the Street realize that AI can be a very powerful catalyst for the advancement of medicine. Speaking at the unveiling of the internet infrastructure project called the Stargate Project on Jan. 22, the multi-billionaire explained that AI could be used to find cancer fragments in people’s blood, facilitating the development of cancer vaccines.

Ellison’s assessment, which suggests that AI could become quite ubiquitous in medicine, has sent the stocks of companies that use AI to improve the field sharply higher. Among the names in the latter category are Schrodinger (SDGR), Recursion Pharmaceutical (RXRX), and, of course, iCAD. Specifically, iCAD surged an incredible 57% in the five trading days through Jan. 29. 

And importantly, I have little doubt that AI will indeed provide a tremendous boost for medicine, given the prevalence of repeating, extremely complex patterns and the great utility of data in the field. Providing evidence of the latter assertion, iCAD reports that ProFound AI “Determined women who were at a higher risk of developing breast cancer, with up to 2.4 times more accuracy than traditional risk models.”

Additionally, excitement about the power of AI in general is building in America and other Western countries, making clinics more likely to adopt iCAD’s offerings.  

Given these points, I expect the rally of medical AI stocks in general and of iCAD in particular to continue for a long period of time. 

iCAD’s Market Expected to Grow Very Rapidly and Its Market Cap Is Low

The AI in breast imaging market is expected to jump from $7.9 billion in 2024 to $85.4 billion by 2033, representing a huge compound annual growth rate of over 30%, according to one source. As a leading company in the sector, iCAD is well-positioned to benefit from this rapid growth. 

“When no cancer was clinically detected by screening mammography, even Artificial Intelligence algorithms trained for short time horizons can forecast the chance of developing cancer for up to five years in the future,” researchers wrote in a recent peer-reviewed paper.

And since iCAD’s market capitalization is still only $100 million, even after its big run, the shares still have room to rise a great deal in the short, medium and long terms. 

Disclaimer: At the time of writing, the author did not own any of the stocks mentioned in this article. The information provided in this article is for educational and informational purposes only and should not be construed as investment advice. Always conduct your own research or consult with a licensed financial professional before making any investment decisions. Past performance is not indicative of future results.

Larry Ramer is currently ranked 283 out of 30,613 financial bloggers analyzed by TipRanks, with a 15.3% return on his buy and sell ratings. He has been a long-time contributor to Insider Monkey, Seeking Alpha and InvestorPlace. He is one of the founding contributors to this newsletter.

He focuses on contrary investing and specializes in the renewable energy and consumer discretionary sectors. Among his highly successful, contrarian picks have been Plug Power, Exxon Mobil, solar stocks, and airline stocks. On the downside, he was an early predictor of the collapse of cryptocurrencies, marijuana stocks, Ocugen, and Meta Platforms.