INSP · Inspire Medical Systems
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $76.78
Note written ·
Price against the kill line
20.4% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $76.78, on record since 11 November 2026. The shares are up 6.8% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $76.78, the highest close of the last 63 sessions (18 September 2026), would show the shares leading the S&P 500. Full-year 2026 revenue above the $860 million top of guidance would also show them leading.
Research onlyNot in the portfolio.
Key figures from the filings · Health Care
Quarter to 30 September 2026, filed 2 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 207
- Revenue, change on a year (%)
- −7.9
- Gross margin (%)
- 86.0
- Operating margin (%)
- −13.9
- Free cash flow, four quarters ($M)
- 97.9
- Price to earnings (×)
- 17.6
- Free-cash-flow yield (%)
- 5.5
All filed numbers
What Inspire Medical Systems reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 207 | −7.9 | 86.0 | −13.9 |
| first filed | 201 | −7.6 | 85.5 | −0.3 |
| first filed | 205 | +1.6 | 86.5 | −0.5 |
| first filed | 269 | +12.2 | 86.6 | 17.1 |
| first filed | 225 | +10.5 | 85.8 | 4.3 |
| first filed | 217 | +10.8 | 84.0 | −1.5 |
| Pre-tax income ($M) | −25.0 |
| Net income ($M) four quarters: 101 | −24.4 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | −2.3 |
| Operating cash flow ($M) | 135 |
| Capital spending ($M) | 37.1 |
| Free cash flow ($M) | 97.9 |
| Cash and short-term investments ($M) | 328 |
| Debt ($M) | Not available |
| Net cash, cash less debt ($M) | Not available |
| Deferred revenue ($M) | Not reported |
| Backlog, orders not yet delivered ($M) | Not reported |
| Receivables ($M) | 105 |
| Inventory ($M) | 179 |
| Shareholders' equity ($M) | 827 |
| Market value ($M) | 1,770 |
| Enterprise value, market value plus net debt ($M) | Not available |
| Enterprise value to sales (×) | Not available |
| Enterprise value to operating income (×) | Not available |
| Price to earnings (×) | 17.6 |
| Price to book value (×) | 2.1 |
| Free-cash-flow yield (%) | 5.5 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 15.5% of shares outstanding sold short, 4.5 days of average trading to cover, +7.1% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $0 |
| 12 monthsfrom | $0 | $666K |
The thesis
Inspire Medical Systems is more likely to lag the S&P 500 than beat it over the next three months. Third-quarter revenue fell 7.9% to $206.7 million from $224.5 million a year earlier, and the company narrowed 2026 revenue guidance to $850 million–$860 million from $835 million–$875 million (8-K, 2 November 2026). The fourth-quarter report, expected around February 2027, settles whether the decline is ending, because management has said it expects a significant sequential revenue increase in the quarter (Q3 2026 earnings call, 2 November 2026).
The shares closed at $62.11 on 11 November 2026, down from $66.61 on 4 November 2026, the session before the report's market reaction fully set in. That close is below the 50-day average of $69.02 and above the 200-day average of $57.64. The published kill line has not been crossed.
Bullish and bearish views on Inspire Medical Systems, Inc.
The bull case on Inspire Medical Systems, Inc. (INSP), in brief: third-quarter results beat estimates. The bear case: revenue is still falling.
Bull case
- Third-quarter results beat estimates. Revenue of $206.7 million beat the $204.3 million estimate, and adjusted earnings per share of $0.14 beat the $0.09 estimate (company 8-K and Benzinga, 2 November 2026).
- Management guides to growth in 2027. On the 2 November 2026 call, management said it expects low single-digit revenue growth in 2027, citing a more stable coding environment and battery replacement revenue. CEO Tim Herbert called the initial guide intentionally conservative.
- Margins and cash are holding. Third-quarter gross margin was 86.0%, helped by a higher mix of Inspire V sales. Cash, equivalents and investments were $453.1 million at 30 September 2026, and third-quarter operating cash flow was $46.4 million (8-K, 2 November 2026).
- Patients may be delayed, not lost. Management said on the 2 November 2026 call that many patients who went untreated during the coding disruption remain in the queue. It put the 2026 reimbursement headwind at about $120 million, roughly $30 million of it in the third quarter.
- Some brokers raised targets after the report. On 3 November 2026, JPMorgan raised its Neutral target to $65, Wells Fargo raised its Equal-Weight target to $69, Piper Sandler raised its Neutral target to $70, and Baird raised its Neutral target to $77 (Benzinga).
Bear case
- Revenue is still falling. Third-quarter revenue fell 7.9% year over year, mainly on lower U.S. revenue tied to coding and reimbursement challenges. Second-quarter revenue had fallen 7.6% (company 8-K, 2 November 2026).
- Guidance was narrowed, not raised. The $855 million midpoint of the 2026 revenue range is unchanged. Adjusted diluted earnings per share guidance was narrowed from $1.05–$1.45 to $1.20–$1.40. On the call, Piper Sandler's Adam Maeder argued the midpoint implies fourth-quarter growth slows from the third-quarter pace, and the chief financial officer said a large step-up is still expected.
- Reported losses remain large. The third-quarter GAAP operating loss was $28.7 million and the net loss was $24.4 million, against adjusted operating income of $1.9 million (company 8-K, 2 November 2026).
- Several brokers cut targets. On 3 November 2026, Barclays cut its Underweight target to $62, Evercore ISI cut its In-Line target to $60, and Truist cut its Hold target to $76 (Benzinga). The $62 and $60 targets sit at or below the $62.11 close of 11 November 2026.
- Payment values are far off. The new single-lead billing codes take effect 1 January 2028. Management said on the 2 November 2026 call that the first valuation panel meeting is expected around January 2027 and that CMS would first publish a proposal in July 2027.
Price setup
The shares closed at $62.11 on 11 November 2026, 57.8% below the 52-week high of $147.03 (intraday, 10 December 2025). The 52-week closing low is $40.05 on 15 May 2026. The three-month change is 6.7%, measured from a $58.20 close on 13 August 2026.
Since the report the shares have slid through successive closes: $66.53 on 5 November 2026, $63.98 on 6 November 2026, $64.33 on 9 November 2026, $62.31 on 10 November 2026 and $62.11 on 11 November 2026. The 200-day average of $57.64 is the nearest moving-average level below the close. The 50-day average of $69.02 sits above it.
SEC Form 4 filings show four directors received share awards at $68.07 on 14 October 2026, filed 16 October 2026, and an officer award of 6,350 shares on 31 August 2026. No open-market insider sales appear in recent filings.
Catalysts ahead
- ~January 2027 (est.): First industry valuation panel meeting for the new single-lead CPT codes, as described by management. Starts the process that sets per-procedure physician payment under the 2028 codes.
- ~10 February 2027 (est.): Fourth-quarter and full-year 2026 report. Shows whether revenue reached the $850 million–$860 million guided range and whether the sequential step-up management described arrived.
- ~July 2027 (est.): CMS proposed payment values for the new single-lead CPT codes. Sets how much the approved codes are worth in per-procedure reimbursement.
What would change the view
A daily close above $76.78, the highest close of the last 63 sessions (18 September 2026), would show the shares leading the S&P 500. Full-year 2026 revenue above the $860 million top of guidance would also show them leading.
What it trades with
Inspire trades on its own reimbursement and coding events rather than on broad medical-device indexes. Moves in the shares follow U.S. payer policy and procedure volumes for sleep-apnea nerve stimulation. Management also says it monitors GLP-1 obesity drugs as a possible headwind and, over time, a possible source of more eligible patients (call, 2 November 2026).
The evidence, claim by claim (8)
- Third-quarter 2026 revenue was $206.7 million, down 7.9% from $224.5 million; gross margin 86.0%. Inspire Medical Systems Q3 2026 earnings release (8-K) · as of
- 2026 revenue guidance narrowed to $850 million–$860 million from $835 million–$875 million; adjusted diluted EPS $1.20–$1.40. Inspire Medical Systems Q3 2026 earnings release (8-K) · as of
- Third-quarter GAAP operating loss $28.7 million, net loss $24.4 million, adjusted operating income $1.9 million. Inspire Medical Systems Q3 2026 earnings release (8-K) · as of
- Cash, equivalents and investments were $453.1 million at 30 September 2026; third-quarter operating cash flow $46.4 million. Inspire Medical Systems Q3 2026 earnings release (8-K) · as of
- Management guided to low single-digit 2027 revenue growth and sized the 2026 reimbursement headwind at about $120 million, about $30 million of it in the third quarter. Q3 2026 earnings call transcript · as of
- Third-quarter adjusted EPS of $0.14 beat the $0.09 estimate; sales of $206.695 million beat the $204.304 million estimate. Benzinga · as of
- Barclays cut its Underweight target to $62; Evercore ISI cut its In-Line target to $60; Truist cut its Hold target to $76. Benzinga analyst actions · as of
- JPMorgan raised its Neutral target to $65 and Wells Fargo raised its Equal-Weight target to $69. Benzinga analyst actions · as of
Sources
- Inspire Medical Systems, Inc. - Form 8-K - FY2026 · sec.gov
- Inspire (INSP) Q3 2026 Earnings Call Transcript · webull.com ·
- Finviz
Related · shared themes
CDNA
CareDx
CareDx's shares are modestly more likely than not to beat the S&P 500: transplant testing revenue grew 39% in the third quarter excluding…
GRAL
GRAIL
GRAIL's shares are more likely to lag the S&P 500 over three months: after a 78.8% three-month rise, approval of the Galleri cancer test…
QDEL
QuidelOrtho
QuidelOrtho's shares are more likely to lag the S&P 500: third-quarter revenue fell 11.6% and net leverage rose to 4.5 times while the…
PLSE
Pulse Biosciences
Pulse Biosciences is modestly more likely to lead the S&P 500 because $189.2 million of cash funds its atrial-fibrillation catheter through…
See also · stocks to watch