In the volatile biotech industry, it is easy to overlook small-cap medical device companies, particularly those that are not yet profitable. But every now and then, a company slips under the radar despite having the ideal combination of innovation, market opportunity, and long-term strategic execution. One such company is Alphatec Holdings (ATEC), a medical technology firm specializing in advanced spine surgery solutions.
Alphatec uses artificial intelligence (AI) technologies to improve surgical precision, automate signal monitoring, and provide intraoperative analytics. While it is not a pure-play AI company, AI is becoming more integrated into its platform, helping to shape the future of spine surgery.
With consistent revenue growth, ATEC is gradually gaining traction. Valued at a market capitalization of $1.6 billion, Alphatec stock has risen 21% year to date (YTD), outperforming the S&P 500 Index's ($SPX) gain of 2.2% YTD. Long-term investors who are willing to dig deeper may find this beaten-down growth stock to be a hidden gem.
A Risky Yet Rewarding Opportunity
Founded in 1990, Alphatec initially focused on spinal implants and surgical instrumentation. However, it is now reimagining spine surgery as a fully integrated experience, with cutting-edge implants, navigation systems, and surgical software. The company's platform is intended to assist spine surgeons in operating with greater precision, reducing complications, shortening patient recovery times, and collecting intraoperative data for better long-term outcomes.
Alphatec has achieved double-digit revenue growth lately, owing to increased surgeon adoption and new product launches. In the first quarter of 2025, total revenue increased 22% year on year to $169 million, with surgical revenue up 24%. Procedure volume is increasing as more surgeons use Alphatec's approaches. The company is quickly becoming a preferred partner for spine surgeons because of its technological capabilities. In Q1, Alphatec experienced an 18% increase in new surgeon adoption.
Like most growth companies, Alphatec has yet to turn a profit despite increasing revenues. These losses are largely the result of aggressive reinvestment in growth, research and development (R&D), and surgeon support. During the quarter, the company spent $16.58 million on R&D. Adjusted gross margin reached 70.4% in the quarter. Looking at the firm's consistent revenue growth and margins, profitability may not be far away, especially if the company continues to increase procedure volumes and expand its ecosystem.
Adjusted EBITDA stood at $10.5 million in the quarter, up from a $3 million loss in the year-ago quarter. At the end of Q1, Alphatec had $153.2 million in cash and cash equivalents. Management expects adjusted EBITDA of $78 million in 2025, compared to $31 million in the previous year. Analysts covering Alphatec predict that revenue will increase by 20.1% in 2025, in line with management's expectations. Revenue could rise by 18.3% in 2026, with losses gradually declining.
The U.S. spine surgery market is large and growing, with a projected value of $20 billion by 2031. Chronic back pain and spinal deformities are on the rise, owing to the aging population and climbing obesity rates. While Alphatec's market share remains small, this allows the company plenty of room to grow. As demand for more precise and less invasive surgeries increases, the few companies like Alphatec with integrated, AI-capable surgical platforms may lead their industry.
Of course, growing biotech stocks can be risky. Alphatec faces stiff competition from larger, established players in the medical technology industry, such as Intuitive Surgical (ISRG), Stryker (SYK), and Medtronic (MDT). Furthermore, continued losses may necessitate additional capital raises or risk share dilution.
For a company in its early growth stages, however, these risks are manageable, especially given Alphatec's strong traction with both products and customers. Its sole focus on spine surgery also distinguishes the firm as an expert in its field, which is also known as a moat. Still, because Alphatec is a growing biotech company, ATEC is better suited for aggressive investors willing to hold the stock until it reaches its full potential.
What Does Wall Street Say About Alphatec Stock?
Last month, H.C. Wainwright analyst Sean Lee reiterated his “Buy” rating on ATEC stock, citing the company's strong Q1 2025 performance and growth trajectory. Lee emphasized Alphatec's improved profitability, citing consecutive quarters of positive adjusted EBITDA and a decrease in cash burn. The company now expects positive cash flow by year-end, with a projected increase in adjusted EBITDA for 2025. Despite regulatory and financial risks, Lee believes Alphatec is well-positioned for long-term growth.
Backed by valuation metrics like EV-to-sales and DCF analysis, Lee set a 12-month price target of $20 per share. Separately, Barclays also maintained a “Buy” rating on ATEC with a price target of $21.
Recently, Lake Street initiated coverage of ATEC stock with a price target of $18 and a “Buy” rating. According to the analyst, Alphatec is the only major spine company fully committed to improving spinal surgery outcomes, while the rest of the industry appears disorganized or uncertain. Lake Street also predicts that Alphatec's exceptional growth rate will continue.
On Wall Street, ATEC is rated a “Strong Buy” by consensus. Of the 11 analysts covering the stock, nine have rated it a “Strong Buy” while one analyst recommends a “Moderate Buy” rating and one rates the stock a “Hold.” Based on its mean price target of $18.32, Wall Street expects the stock to climb as high as 66% from current levels. Furthermore, the Street-high estimate of $22.50 per share implies potential upside of nearly 105% over the next 12 months.
