We came across a bullish thesis on iCAD, Inc. (ICAD) on Twitter by northeasternsvf. In this article, we will summarize the bulls’ thesis on ICAD. iCAD, Inc. (ICAD)'s share was trading at $2.83 as of Feb 20^th.

A doctor consulting with a patient, discussing treatment options for breast cancer.

iCAD is a leading AI medical technology company focused on innovative cancer detection solutions. Headquartered in Nashua, N.H., the company provides AI-powered mammography analysis through its ProFound Breast Health Suite, which enhances breast cancer detection, density assessment, and risk evaluation. With 20-40% of cancers missed in mammography screenings, early detection is crucial, improving five-year survival rates to over 99%. iCAD previously operated a cancer therapy division but divested this segment in 2023 to focus exclusively on its high-margin cancer detection business and transition to a subscription-based cloud model, aligning with industry trends favoring recurring revenue.

The application of AI in healthcare is projected to grow significantly, reaching $51 billion by 2030, with AI-driven mammography solutions becoming a key segment. Currently, 37% of breast imaging centers deploy AI, and iCAD has secured a 17% market share. The company’s AI models provide superior performance, reducing radiologist reading time by 52.7% while improving diagnostic accuracy. Compared to competitors, iCAD stands out with its industry-leading AI capabilities, outperforming alternatives like Volpara, which was recently acquired at a 6-8x revenue multiple, whereas iCAD currently trades at just 2-3x. Integration with OEMs like Hologic and GE further strengthens its market positioning, as these companies have struggled to develop comparable solutions.

Following the divestiture of its therapy business, iCAD has restructured its revenue model to prioritize SaaS-based solutions. The company now offers three pricing models—perpetual, subscription, and cloud contracts. While the transition has temporarily impacted revenue as customers migrate away from perpetual licenses, the shift to cloud-based services will provide cost-effective, scalable, and secure solutions. Management has aggressively pursued new cloud and subscription contracts, leading to improved gross margins above 80%. Recent data suggests momentum in this transition, with cloud contracts increasing significantly between Q3 and Q4 2024.

iCAD is also a potential acquisition target, given the recent buyout of its competitor Volpara at a premium valuation. The company’s international expansion into markets like France, Turkey, and South Africa further supports its growth trajectory. However, risks remain, including market penetration challenges and short-term revenue fluctuations during the cloud transition. The delay in FDA approval for ProFound AI Risk, the only pending product in its cloud suite, is another factor to watch. Management expects approval by early 2025, which could serve as a major catalyst. Overall, iCAD’s focus on AI-powered breast cancer detection, combined with its transition to a high-margin, recurring revenue model, presents a compelling investment opportunity with substantial upside potential.

iCAD, Inc. (ICAD) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 4 hedge fund portfolios held ICAD at the end of the third quarter which was 4 in the previous quarter. While we acknowledge the risk and potential of ICAD as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ICAD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.