BTIG Downgrades ViewRay Inc. (VRAY) to Neutral, 'Stuck Installs, Short Cash Runway, and Need for Fast Alternatives Pushes Us to the Sidelines'

BTIG analyst Marie Thibault downgraded ViewRay Inc. (NASDAQ: VRAY) from Buy to Neutral.

The analyst comments "ViewRay announced preliminary Q1 results below expectations, cut its full-year guide, discussed a high Q1 burn that means cash will only last into Q1 of 2024, and announced they are evaluating strategic alternatives. More delayed MRIdian installations are the result of inflated construction costs for some customers; the high customer investments needed to adopt the technology have exacerbated this issue. Piled on to this are delayed cash collections from international customers and inventory spend for components with longer lead times, meaning working capital is likely to remain challenging. With only three quarters of cash runway, ViewRay is open to all strategic alternatives, including a corporate sale, merger, or business combination. If a deal were to occur, we would expect it needs to be finalized sooner rather than later (potentially in the next couple of months) to preserve ViewRay’s ~$411M backlog and reduce the risk of customer cancellations. In our prior note reacting to this news, we opined that a rather wide valuation range was possible, anywhere from <1x EV/Sales on the low end (where some low-growth capex companies trade) and ~3x EV/Sales on the higher end if VRAY is viewed as a growth driver for an acquirer. Any delays in a resolution are a negative in our view, since we do think there is some risk of orders falling out of backlog if customers become wary of working with a cash-strapped capital equipment company. On an EV/Sales basis, VRAY now trades at ~3x NTM sales following yesterday’s ~40% decline. We are shocked by the speed of this operating stumble and admit we are uncertain that VRAY will be able to quickly find a suitable acquirer/partner. As a result, we are downgrading VRAY to Neutral. BTIG does not provide price targets on Neutral-rated stocks."

For an analyst ratings summary and ratings history on ViewRay Inc. click here. For more ratings news on ViewRay Inc. click here.

Shares of ViewRay Inc. closed at $1.83 yesterday.

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