Canaccord downgrades AngioDynamics to hold

Canaccord Genuity has downgraded AngioDynamics (NASDAQ:ANGO) to “hold” from “buy” and reduced its price target to $13 from $14.50, following the abrupt departure of CEO, Joe DeVivo, “which we think will heighten investor concern near term, and increase uncertainty.” The stock closed at $12.14 on Monday.

“What’s more, this change compounds myriad existing challenges that have produced sluggish and inconsistent performance in the business over the past year,” writes analyst Jason Mills.

“More recently, we lament the sustained loss of momentum in the VA business (driven by the Morpheus PICC withdrawal and lack of competitive product breadth) and lumpy/tepid NanoKnife capital sales (e.g. unable to secure an ICD-10 code in the U.S. nor NICE recommendation in the UK at the beginning of the calendar year), not to mention disappointing uptake with expected growth drivers (e.g. AngioVac),” he added.

Mr. Mills said these challenges have led management to significantly rein in fiscal 2016 guidance multiple times.

AngioDynamics did not provide an explanation for Mr. DeVivo’s departure. He was replaced by new CEO, James Clemmer.

“While we are positive on many initiatives undertaken by Mr. DeVivo, we suspect previous management’s inability to consistently deliver against stated objectives over the past few years frustrated the company’s board, and we think AngioDynamics could benefit medium-to long-term from a change at the top,” Mr. Mills said.

“We think the business deserves scrutiny top-to-bottom, with the potential for targeted divestitures and/or a consolidated, more focused direct sales force, in order to concentrate the business on fewer target markets, improve gross margins and perhaps achieve more consistent operating leverage,” he added.