RadNet Stock Hit By Short Seller Report, Questions AI Hype, Growth Claims

Core Viewpoint - RadNet, Inc. is facing scrutiny following a short report from Hunterbrook Capital, which questions the company's valuation and growth narrative centered around AI technology in diagnostic imaging [1][3]. Company Overview - RadNet operates a network of 407 outpatient imaging centers in the United States, providing services such as mammograms, CT scans, and X-rays [1][2]. Valuation and Market Performance - The company's stock price surged from below $15 until 2020 to a peak of $86, resulting in a market capitalization exceeding $6 billion, approximately three times its revenue from the previous year [3]. - The report suggests that RadNet's current valuation is aggressive, given that its core business operates on low margins [3]. AI Technology Claims - Less than 5% of RadNet's revenue is attributed to its Digital Health segment, which the report claims is primarily driven by internal sales rather than third-party adoption [4]. - The report argues that without the AI narrative, RadNet functions similarly to a traditional imaging provider [5]. Financial Metrics and Growth Analysis - The same-center sales growth metric, often cited by analysts as a positive indicator, may not be reliable due to inconsistencies in the company's operational footprint over time [5]. - An analysis indicates that RadNet has combined nearby locations into single reporting units, leading to a misleading representation of growth; organic growth is estimated at only 2.5%–3%, compared to the reported 6%–10% [6]. Recent Earnings Report - In the third quarter, RadNet reported adjusted earnings of 20 cents per share, below the consensus estimate of 22 cents, while sales reached $522.87 million, surpassing the consensus of $494.41 million [7]. - The company raised its fiscal 2025 sales guidance to a range of $1.985 billion to $2.025 billion, compared to the consensus of $1.973 billion [7]. - At the time of publication, RadNet shares were down 7.40% to $67.21 [7].