INSP Option Trade: Is Now the Time to Buy Calls?

Inspire is a medical technology company focused on minimally invasive solutions for obstructive sleep apnea (OSA). Its core product, the 'Inspire system', is a neurostimulation technology approved by the FDA, EU, and Japan for moderate to severe OSA. The 'Inspire system' continuously monitors a patient's breathing and delivers mild hypoglossal nerve stimulation to maintain an open airway. The company primarily targets patients with moderate to severe OSA who have failed or cannot tolerate CPAP therapy. Inspire sells its system to hospitals and ambulatory surgery centers in the U.S. and Europe through a direct sales organization, and in Japan and Singapore through distributors. Inspire differentiates itself by offering a minimally invasive, closed-loop solution with high patient compliance, supported by compelling clinical data, as an alternative to CPAP.

INSP's short-term outlook is strongly positive. The company reported Q3 earnings significantly exceeding expectations, with an adjusted EPS of $0.38 versus an estimated loss of $(0.19). Revenue also surpassed estimates, coming in at $224.501M against an expected $220.467M. More importantly, Inspire Medical Systems raised its FY2025 GAAP EPS guidance substantially, from $0.40-$0.50 to $0.90-$1.00, dwarfing the previous analyst consensus of $0.45. While sales guidance was affirmed and only slightly beat estimates, the magnitude of the EPS guidance increase signals strong operational performance and improved profitability. This news is likely to drive significant investor confidence in the near term. Given the substantial earnings beat and increased guidance, INSP is likely to experience upward price momentum over the next 1-2 weeks, making a bullish options strategy potentially profitable.

INSP exhibits a bearish technical outlook. The stock has experienced a significant downtrend over the past 90 days, plummeting from approximately $132.83 on June 30th to $84.96 as of November 4th. The price is currently well below its 50-day SMA, which itself is declining, and also below its 21-day EMA, confirming the downward momentum. The 200-day SMA is available starting from 2025-09-08 and is far above the current price, indicating a longer-term bearish trend is intact. Momentum indicators also signal weakness. The MACD remains negative, with the MACD line below the signal line, although the histogram is showing less negative values recently. The RSI is at 40.01, suggesting that the stock is not yet oversold, leaving room for further declines. The Stochastic Oscillator shows the %K line below the %D line, indicating bearish momentum. ADX is at 25.45, suggesting the downtrend has some strength, but is not extremely strong. Overall, the technical indicators suggest a continuation of the downtrend for INSP over the next 1-3 months.

Inspire Medical's MD&A presents a somewhat mixed outlook. For the three months ended September 30, 2025, revenue increased by 10.5% to $224.5 million compared to $203.2 million in 2024, driven by increased market penetration and awareness, but offset by ENT surgeon capacity constraints and patients delaying therapy for Inspire V or GLP-1 trials. Gross margin improved to 85.8% from 84.1% due to increased sales volume and a higher sales mix of Inspire V. However, net income decreased by 46.3% to $9.9 million. For the nine months ended September 30, 2025, revenue increased 14.2% to $642.9 million. Gross margin decreased slightly to 84.9% from 84.5%. The company noted that some patients and physicians were delaying Inspire therapy until Inspire V is available, which may impact revenue until 'primarily in the remainder of 2025 and early 2026'. The company is increasing its direct-to-consumer marketing efforts, expecting 'direct-to-consumer expenditures to increase significantly over 2024 levels during the remainder of 2025'. Net cash provided by operating activities was $64.5 million for the nine months ended September 30, 2025. Cash, cash equivalents, and investments totaled $410.9 million as of September 30, 2025, a decrease of $105.6 million from December 31, 2024. Macroeconomic conditions, including 'increased inflationary pressures and market instability,' are creating additional economic challenges, which may cause customers to decrease or delay orders. The potential impact of GLP-1 drugs on demand for Inspire therapy is also being monitored.

The earnings call reveals a bearish sentiment due to a significant reduction in full-year guidance. Timothy Herbert acknowledged 'challenges we are facing in the commercial rollout of our Inspire V next-generation system,' leading to an adjustment in full-year revenue guidance to $900 million to $910 million, down from the previous $940 million to $955 million. This reflects a growth of 12% to 13% over 2024, but a 4% reduction from prior expectations. Diluted net income per share was also reduced to $0.40 to $0.50 from $2.20 to $2.30. Key headwinds include many centers not completing the necessary training and SleepSync implementation, and delays in Medicare billing approval for CPT code 64568. While efforts are underway to address these issues, such as leveraging technical teams for SleepSync implementation (already completed at over 50% of U.S. centers), the immediate impact is a slower-than-anticipated transition to Inspire V and a burn down of existing Inspire IV inventory. Despite positive early results from Inspire V, including a 20% reduction in surgical times at centers that have transitioned, these operational challenges overshadow the potential benefits in the near term.

INSP's financial performance presents a mixed but slightly positive outlook. Revenue has generally increased, starting from $164.01M in Q1 2024 and reaching $224.50M in Q3 2025, indicating a growth trajectory. The gross profit ratio has remained relatively stable, fluctuating between 0.84 and 0.858, suggesting consistent profitability on sales. Operating cash flow has been volatile, with a negative $6.7M in Q1 2025, but a strong recovery to $68.53M in Q3 2025, reflecting improved cash generation recently. Total debt has remained relatively consistent, starting at $24.5M in Q1 2024 and ending at $30.3M in Q3 2025. While the company experienced net losses in some quarters, the recent performance shows positive net income and strong operating cash flow, indicating a potential turnaround and improved financial health in the near term.

The company presents a moderately bullish investment profile based on its financial data. Revenue has shown positive growth, indicating increasing market demand or successful market penetration. The gross margin is healthy, suggesting efficient cost management in production or service delivery. A strong return on equity (ROE) signals effective utilization of shareholder investments to generate profit. The price-to-earnings (P/E) ratio suggests the stock is trading at a premium, but this could be justified by the company's growth prospects and profitability. A manageable debt-to-equity ratio indicates a reasonable level of financial leverage. The current ratio, being greater than 1, demonstrates the company's ability to cover short-term liabilities with its current assets, further solidifying its financial health. Overall, the combination of revenue growth, healthy profitability metrics, and a solid balance sheet makes the company an attractive investment for the next 12 months, although the elevated P/E ratio warrants careful monitoring.