Canaccord Genuity Downgrades STAAR Surgical (STAA) to Hold, Disconcerting Sales Trends

November 1, 2012 8:28 AM EDT
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Price: $10.40 --0%

Rating Summary:
    2 Buy, 4 Hold, 0 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 6 | Down: 3 | New: 2
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Canaccord Genuity downgraded STAAR Surgical (NASDAQ: STAA) from Buy to Hold with a price target of $7.00 (from $8.25).

The firm comments: "While management deserves high marks for GM expansion, manufacturing consolidation execution (to benefit margins and tax rates in 2014), and positive CF generation, Q3 marked the third consecutive quarter of disconcerting sales trends – most notably three straight ICL sales misses. We think the situation in Korea, which was the culprit behind the Q3 ICL miss, can be resolved but think it’s realistically a multi-quarter process before STAA returns to solid ICL growth in Korea, notwithstanding management’s focus there. China – Q2’s culprit – rebounded a bit in Q3 and is a big potential market, but is a country on which it is precarious to rely consistently, in our view. STAA’s YTD revenue growth rate (2%) falls well below the small-cap med-tech average (8-9%), yet its current year EV/sales multiple (3x) is in line with the group. Consequently, we think the stock could be range-bound for a few quarters until we see evidence of improving growth (easier comps begin in Q2/13). While we maintain a positive long-term bias on the ICL opportunity, we move to the sidelines for now, with a HOLD rating, and lower our target price to $7.00 from $8.25."

The firm sees Q4 sales of $17.1M, down from $18.0M, and non-GAAP EPS of $0.02, down from $0.03.

For an analyst ratings summary and ratings history on STAAR Surgical click here. For more ratings news on STAAR Surgical click here.

Shares of STAAR Surgical closed at $6.44 yesterday.

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