InMode's Crossroads: Can Shareholder Pressure Drive Turnaround?

InMode Ltd. (NYSE: INMD) finds itself at a pivotal moment, as its largest shareholder, DOMA Perpetual Capital Management, demands urgent changes to leadership and capital allocation strategy. The firm’s May 9 letter to InMode’s Board of Directors—calling for the removal of CEO Moshe Mizrahy and the resumption of a share repurchase program—has reignited debates about governance, valuation, and the path to unlocking shareholder value. With the stock trading near its 52-week low, the stakes are high.

The Case Against Mizrahy: Leadership and Strategy Under Fire

DOMA’s letter paints a stark picture of management failure. Key criticisms include:
- Declining Financial Performance: Mizrahy has cut quarterly guidance in seven of the past eight quarters, with revenue growth stalling. Q1 2025 revenue of $78 million missed consensus estimates, while EPS fell 18% below expectations.
- Operational Missteps: The abrupt firing of the U.S. Head of Sales—a critical role in InMode’s largest market—preceded a 10% drop in U.S. sales to 50% of total revenue, down from 62-63% historically.
- Strategic Blind Spots: Mizrahy has rejected cost-cutting opportunities, such as relocating production to FDA-approved facilities in the Dominican Republic or Costa Rica. DOMA argues this refusal ignores both cost savings and geopolitical risks tied to Israel-based manufacturing.

DOMA also critiques Mizrahy’s public dismissals of buybacks as “not the best investment for shareholders,” despite the company holding $500 million in cash (60% of its $966 million market cap). This stance, DOMA argues, reflects a fundamental misunderstanding of capital allocation priorities.

The Financial Case for Buybacks: Undervaluation and Cash Power

InMode’s financial health contrasts sharply with its stock price. The company:
- Holds $500M in cash, with no debt and $100M+ annual free cash flow.
- Trades at a P/E of 6.11, below peers like Cynosure (NASDAQ: CYNO, P/E 14.3) and Solta Medical (acquired by Allergan).
- Has 80% gross margins, driven by recurring revenue from disposable products and extended warranties.

DOMA’s argument for buybacks hinges on the stock’s undervaluation. At $14.56 (as of May 2025), the enterprise value (excluding cash) is just $375M—a fraction of the company’s tangible assets, including its global distribution network and IP portfolio.

Analysts echo this concern. While Jefferies upgraded INMD to “Buy” with a $15 price target, BTIG downgraded it to “Neutral,” citing poor guidance and execution risks. The stock’s 22% year-to-date decline underscores investor frustration.

Market and Analyst Sentiment: Mixed Signals Ahead

The Q1 2025 results and DOMA’s demands have polarized the analyst community:
- Bullish View: Long-term believers point to InMode’s dominant position in RF-based aesthetics and its Morpheus8 brand, which commands 80%+ gross margins. A leadership change could reignite growth.
- Bearish View: Skeptics highlight slowing revenue (projected 2.3% annual decline by 2025 vs. industry’s 8% growth) and Mizrahy’s communication missteps.

The Board’s response will be critical. If it acts on DOMA’s demands:
- CEO Replacement: A new leader could stabilize sales, optimize costs, and rebuild investor confidence.
- Buybacks: Repurchases at current levels could boost EPS and valuation multiples.

Failure to act, however, risks further erosion of confidence. As DOMA notes, the Board has a fiduciary duty to address Mizrahy’s “antagonistic management style” and the “depressed valuation” it has created.

Conclusion: A Crossroads with High Stakes

InMode sits at a crossroads: its operational strengths (cash, IP, margins) are undeniable, yet its stock languishes due to poor leadership and capital allocation. DOMA’s demands present a clear path forward—replace Mizrahy and deploy cash aggressively.

The data is compelling:
- Undervaluation: The $375M enterprise value (excluding cash) vs. $500M in cash alone suggests intrinsic value is already embedded in the balance sheet.
- Buyback Potential: Even a $200M repurchase program would reduce shares outstanding by ~20%, boosting EPS and valuation metrics.
- Leadership Risk: Mizrahy’s track record of guidance cuts and strategic missteps (e.g., rejecting cost-saving moves) argues for change.

For investors, the next few months will be decisive. A leadership change and buyback restart could catalyze a rebound, aligning the stock with its fundamentals. Without them, InMode risks becoming a cautionary tale of governance failure in a sector where innovation and execution are paramount.

The clock is ticking—for InMode, the question is not whether it can recover, but whether its Board will act in time.