Wall Street Warms Up to Citron’s Short Call on Inogen

(Bloomberg) -- Wall Street analysts who were once bullish on shares of Inogen Inc. are growing more amenable to arguments that short-sellers including Muddy Waters and Citron Research made when the stock looked invincible.

The maker of oxygen therapy machines has seen its shares downgraded by both Needham and JPMorgan in the last week, with JPMorgan analyst Robbie Marcus giving Inogen its first sell-equivalent rating. Inogen’s “turbulent” story over the past year amid disappointing results and a decline in the underlying oxygen market growth spurred Marcus’s bearish view.

The stock fell as much as 2.8% in Wednesday’s abbreviated trading session, and remained near levels not seen since the start of 2017. Shares are down more than 75% from a September peak, compared to about a 2% gain for major U.S. equity indexes.

While JPMorgan’s Marcus was among Wall Street’s bulls just two months ago, with a price target that implied shares could roughly double in the next year, the bank now says “there’s less relative upside to shares vs other companies in our MedTech universe as the company works to rebuild investor trust.”

Inogen Short Thesis Continues to Play Out After Forecast Cut

Uninspiring earnings reports and disappointing forecasts have weighed on shares since the stock’s September top, as predictions from skeptics like Muddy Waters and Citron Research bore fruit. Muddy Waters argued back in February that Inogen could reach peak sales as soon as 2019, while Citron last May attacked the company, calling it the “most expensive” name in medical technology.

Short bets against the company have been relatively stable in the past few weeks, with more than 20% of shares available for trading currently sold short, according to data compiled by financial analytics firm S3 Partners. That’s more than five times what it was a year ago, though it’s down a bit from mid-February.

To contact the reporter on this story: Bailey Lipschultz in New York at blipschultz@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm

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