Canaccord Genuity maintains a Hold raating on Cyberonics (NASDAQ: CYBX), and raised the price target to $65.00 (from $62.00), ahead of pending a merger with Sorin Group. Analyst Jason Mills remains cautiously optimistic about the potential.

Mills commented, "We are taking over coverage of CYBX ahead of the pending merger with Sorin Group. Commensurate with the thinking of our partner, Bill Plovanic, we remain cautiously optimistic about the potential for accretive revenue and operating synergies in the wake of this combination. While F4Q top-line results underwhelmed relative to expectations, namely in the US, the earlier-than-expected\ FDA approval of Aspire SR, coupled with easy Y/Y domestic comps coming up in F16, imply better days ahead for this business, in our view. While we think F1Q results will be overshadowed by the CQ3E closing of the Sorin merger, and look for initial “NewCo” guidance to invigorate investor attention on “NewCo” later this year, we note that our updated F16-17 revenue model projects revenue growth acceleration toward 10% in F16 (9% to be exact) and 11% in F17E – progress toward these higher growth rates should be a catalyst for these shares. We maintain the HOLD rating and bump our target to $65 from $62. We are keeping an open mind about the stock pending more detailed information about NewCo in a few months."

Mills also added, "FQ4/15 net sales of $74.1M increased 2.6% Y/Y, driven by record WW unit sales of 3,753. Broken down, the US business grew 2.0% Y/Y to $59M, primarily driven by a 4% Y/Y increase in average generator ASPs, and despite a continued lag in unit sales (-2% Y/Y). OUS, unit growth during the quarter exceeded 18%, driving a 4.9% Y/Y increase in sales (+17.5% on a CC basis). AspireSR continued on its recent growth trajectory, accounting for 23% of all international unit sales during the quarter (vs. 17% in FQ3/15) and much higher in “tapped markets”, as noted above. Foreign currency negatively impacted revenues by ~$1.8M in FQ4/15. Gross margin in the quarter was 89.8%, representing a Y/Y decrease of 40bps. We were modelling GM of 90.8%. Inefficiencies in the early days of the new Costa Rican facility, as well as a larger percentage of international sales during the quarter, were cited as the main driving factors of the decrease. Operating margins during the quarter were 32.4%, representing a slight increase over 31.3% in the year-ago period. Adjusted EPS of $0.64 (vs. GAAP of $0.40) came in just above our $0.63 estimate. The difference between pro forma and GAAP was primarily attributable to mergerrelated expenses. For FY2016, we have adjusted our revenue estimate to $318.5M (+9% Y/Y) from $318.4M and our EPS forecast to $2.54 from $2.50. For FY2017E, we have adjusted our revenue estimate to $354M (+11% Y/Y) from $343.5M and our EPS forecast to $2.93 from $2.89."

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Shares of Cyberonics closed at $64.15 yesterday.