Translation: Original published in Finnish on 3/7/2025 at 7:00 am EET.

Nightingale is just launching the commercial phases with its second and third healthcare partners. The company's comments on the sales pipeline are also promising, and we believe it will announce at least one significant partnership during the current year. At the same time, the ramp-up of cooperation projects and the strengthening of revenue growth seem to be taking longer than our previous expectations. In our opinion, the company's growth story is still broadly on track, and with the decline in valuation, we see the risk/reward ratio turning cautiously attractive again. We reiterate our EUR 2.9 target price and raise our recommendation to Accumulate (was Reduce).

Soft top line, but costs remained under control

Nightingale's fiscal H1'25 (7–12/2024) revenue was lower than our expectations at 2.31 MEUR (Inderes: 2.91 MEUR), growing 35% year-on-year and decreasing -13% from the previous six-month period. This was due to the timing of research projects and the lower-than-expected price level of the Terveystalo cooperation. As expected, profitability was clearly in the red, but cash consumption (~6 MEUR/6 months) was lower than expected thanks to cost discipline, and net cash (IFRS-16 adjusted) was a hefty 59 MEUR at the end of 2024.

Growth is visible, but its trajectory remains unclear

Nightingale aims to integrate its disease risk detection service with the blood sample flows of existing healthcare providers. If successful, the company's revenue would grow strongly and profitability would become positive over time (target: positive EBITDA in the medium term). The company has taken clear steps in this direction: its technology is already widely used in occupational health at Terveystalo, and commercial phases are about to start through Pathology Asia in Singapore and with the support of Boston Heart in the US. The company also has a number of pilot and research projects (Mass General Brigham, Kaiser Permanente, Weill Cornell Medicine, Boston Heart, 23AndMe and Phenome Health) in the pipeline for potential wider use. In light of the company's comments, it also has a number of interesting sales discussions underway, and given its past customer wins, we believe it will announce at least one significant partnership this year.

Due to the slower-than-expected ramp-up of collaborations, we have reduced our revenue forecasts for the coming years by 20-25%, but due to cost discipline we have reduced our profitability forecasts by only 5-10%. Our long-term forecasts changed less sharply. Although the broad partnering base has already mitigated commercialization risks, the visibility of the company's growth remains blurred and highly dependent on the progress of the partnering roll-out. We believe that our estimates rely on a realistic but very high-risk scenario of Nightingale’s business growth (revenue CAGR 34% in 2025-2038e). This requires successful ramp-up of existing customers and continuous new commercial contracts. Investors must therefore believe in the company's breakthrough, take a very long-term view of the stock and accept the risk of capital loss.

Valuation still contains a lot of future expectations, but has returned to an acceptable level

Nightingale’s fundamental-based valuation is very challenging, as possible scenarios vary between destruction and multiplication of invested capital. With current data, our fair value estimate range for the share is wide, EUR 0.8-7.1 (previous EUR 0.7-6.8). In our view, the company's track record continues to support a price closer to the middle of the range (target price EUR 2.9/share). The stock is down 23% since our last report (9/23/2024) and is now priced below our baseline case (EUR 2.9). Moreover, with positive drivers on the horizon for the year (new customer wins, signs of growth in Pathology Asia and Boston Heart partnerships), the risk/reward is becoming sufficiently attractive. There are still downside risks, but we believe the company should be viewed with an investment horizon of at least several years.