Sector Dislocations And Transitory Headwinds Will Create Long-Term Upside Opportunity

Key Takeaways

• Transitory operational delays are expected to resolve soon, positioning the company for accelerated growth as new system adoption and reimbursement improvements unfold.
  
• Market expansion and clinical enhancements will boost provider capacity and adoption, supporting sustained long-term revenue growth amid rising demand for sleep health solutions.
  
• Execution delays, increased competition, operational missteps, and evolving market dynamics threaten revenue stability, margins, and long-term growth prospects for Inspire Medical Systems.

Catalysts

A medical technology company, focuses on the development and commercialization of minimally invasive solutions for patients with obstructive sleep apnea (OSA) in the United States and internationally.

• The recent delay in transitioning centers to the Inspire V next-generation system-including slower onboarding, delayed SleepSync implementation, and the Medicare billing update-are transitory issues; as these barriers resolve (with Medicare billing now live and most centers expected to complete onboarding by end of Q3), procedure volumes and revenue growth are positioned to reaccelerate in 2026 as pent-up demand is realized.
  
• Expanded coverage and proposed reimbursement increases for Inspire's procedures (notably the expected 2026 Medicare OPPS rule enhancements and near-complete payer coverage of the new CPT code) will reduce patient out-of-pocket costs and incentivize additional adoption, supporting both revenue growth and longer-term earnings visibility.
  
• The second half of 2025 will see a ramp in marketing and new center expansion following a purposeful pause in H1 amid the Inspire V launch; this resurgence in patient education, awareness campaigns, and provider capacity building should drive higher procedure volumes and top-line acceleration into 2026 and beyond.
  
• Inspire V's clinical enhancements-shorter procedure times (20% reduction), elimination of the pressure-sensing lead, and workflow simplification-are already increasing implant throughput at transitioned centers (20%+ higher volumes), suggesting a meaningful lift in provider capacity and future revenue as the full installed base adopts these improvements.
  
• Increasing prevalence of obstructive sleep apnea and rising global focus on sleep health are fueling ongoing expansion of Inspire's addressable market; as obesity rates and aging populations climb, structural demand tailwinds are likely to translate into sustained long-term procedure and revenue growth for the company.

Inspire Medical Systems Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Inspire Medical Systems's revenue will grow by 14.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 6.2% today to 8.0% in 3 years time.
• Analysts expect earnings to reach $103.6 million (and earnings per share of $3.28) by about September 2028, up from $53.1 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $131.8 million in earnings, and the most bearish expecting $55 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 48.4x on those 2028 earnings, up from 45.4x today. This future PE is greater than the current PE for the US Medical Equipment industry at 29.7x.
• Analysts expect the number of shares outstanding to decline by 1.31% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.42%, as per the Simply Wall St company report.

Inspire Medical Systems Future Earnings Per Share Growth

Risks

• The slower-than-expected rollout of Inspire V, driven by delays in center training, contracting, onboarding, and technical hurdles with implementing SleepSync, has materially reduced near-term revenue growth rates and deferred volume expansion, increasing execution risk and potentially causing a protracted recovery in revenue and margins into 2026.
  
• Increased dependence on a single primary product (Inspire V) and the complexities of transitioning from Inspire IV introduce risks of technological obsolescence, operational missteps, or further customer delays, which could threaten stability of long-term revenue growth and earnings visibility if competitive alternatives emerge or adoption lags.
  
• The need for higher patient marketing and territory expansion spend in the face of revenue pressure has driven operating expenses up faster than revenue growth, compressing net margins and earnings per share; this cost trend could persist if Inspire Medical Systems must continue elevated spend to regain growth momentum and offset competitive threats.
  
• The potential for structural changes in sleep apnea therapy-such as increased use of GLP-1 drugs for weight loss (reducing OSA prevalence or changing patient eligibility) and broader adoption of non-invasive digital health solutions-could permanently shrink Inspire's addressable market or reduce demand for surgically implanted devices, thereby impacting long-term revenue growth and profitability.
  
• Changes in reimbursement dynamics, especially regarding Medicare and shifting CPT codes, have created temporary barriers but also hint at a long-term risk: payer and regulatory pressure could limit coverage, reduce pricing power, or discourage high-volume implanters from treating certain patient groups-putting sustained pressure on both revenue and margins over time.

Valuation

• The analysts have a consensus price target of $144.533 for Inspire Medical Systems based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $230.0, and the most bearish reporting a price target of just $97.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.3 billion, earnings will come to $103.6 million, and it would be trading on a PE ratio of 48.4x, assuming you use a discount rate of 7.4%.
• Given the current share price of $81.47, the analyst price target of $144.53 is 43.6% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.