Figs stock drops after downgrade on questions about the North American market for medical scrubs

Figs Inc. stock fell 7.5% in early Monday trading after the medical apparel company was downgraded to market perform from outperform at Cowen. The analyst group conducted its own research that throws into question the North American addressable market for medical scrubs. Cowen cut its price target to $23 from $34. Figs management quotes data that puts the U.S. addressable market for healthcare apparel at $12 billion, and the global market at $79 billion, according to Cowen. But analysts' own research found that the market is much more difficult to pin down. "We remain confident in brand strength, premium margins, ROIC, and the path to $1 billion in sales but see uncertainty in North American TAM [total addressable market]," analysts wrote. Analysts also note that COVID has driven down the number of U.S. healthcare workers. "Pre-COVID, employment in the healthcare sector reached nearly 16.5 million, but from January 2020 to the most recent data of October 2021, employment has grown by -0.2 million, or 1.2%," the note said. Cowen estimates that Figs has 9.5% U.S. market share. Figs shares have plunged nearly 54% over the last three months while the S&P 500 index is down 4.2%.

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