RadNet Shares Face Scrutiny Over AI Revenue Claims

RadNet US7504911022

RadNet, a prominent provider of diagnostic imaging services, experienced significant selling pressure on Tuesday following a critical report from short-selling firm Hunterbrook Capital. The company's equity fell as much as 8% intraday, hitting a low of $68.02, before paring some losses. In a swift rebuttal, investment bank Raymond James reaffirmed its "Strong Buy" rating on the stock, labeling the short-seller's allegations as exaggerated.

Raymond James moved quickly to counter the report's central arguments. The firm's analysts defended RadNet's operational strategy, noting that recent clinic closures primarily involved smaller facilities, with patient volumes being successfully transferred to larger centers. This consolidation, they argued, has led to meaningful savings on lease and operational expenses. The bank estimates consolidated imaging center revenue growth for the year at approximately 10%. Furthermore, they highlighted that the centers' EBITDA margin, when adjusted for a first-quarter fire, stands near 11%. RadNet itself has pointed to a consistent increase in the average number of scans performed per center.

The Short Report's Core Allegations

The volatility was triggered by a Hunterbrook Capital report published December 16, which cast doubt on the scale and quality of RadNet's artificial intelligence business segment. The short-seller's primary contention is that AI contributes a marginal portion of total revenue—less than 5%, or roughly $65 million of the $1.5 billion in revenue reported for the first nine months of 2025.

Hunterbrook raised several additional concerns:
* A significant portion of AI revenue is reportedly generated from internal sales to RadNet's own imaging centers, rather than from external customers.
* Patients are allegedly charged an extra fee of around $40 for "AI reads" of their scans.
* The firm recalculated same-center growth rates, suggesting an underlying rate of 2.5–3%, substantially lower than the published range of 6–10%.
* The report also cited accounting adjustments for margins—specifically the exclusion of stock-based compensation and certain R&D expenses—alongside what it termed "extensive" insider stock sales totaling over 780,000 shares worth approximately $50.9 million.

Market Outlook and Key Upcoming Catalysts

The event has reignited debate about the sustainability of growth in the digital health sector. While Raymond James remains bullish, market opinions are divided. The average analyst price target for RadNet shares sits near $91.71, implying a potential upside of about 24% from recent levels.

In the near term, the company's upcoming financial reports and operational updates will be critical. To restore investor confidence and reduce volatility, RadNet may need to provide clear, detailed disclosures regarding:
1. The breakdown of its digital health revenue streams.
2. The methodology used to calculate same-center growth figures.
3. The specific components excluded in its adjusted margin calculations.

A lack of such clarity could lead to continued price swings as the market weighs the competing narratives from Hunterbrook and the company's defenders.