Canaccord Genuity raised its price target for STAAR Surgical (NASDAQ:STAA) to $9 from $7, but maintained its “hold” rating after the company reported fourth quarter results. The stock closed at $10.18 on March 2.
STAAR specializes in ophthalmic devices, targeting two segments: intraocular lenses for cataracts and implantable collamer lenses for refractive correction.
“We think STAAR is turning a major corner as we speak, noting substantial remediation initiatives now in the rear-view mirror, and material, important improvements made in the company across multiple functions, most notably quality control (QC) and clinical/regulatory,” writes analyst Jason Mills.
Wrapping up 2016 with a decent quarter, Mr. Mills said he sees 2017 as a pivotal year for the company, as management puts the final touches on its internal remediation efforts and QC overhaul, and shifts more resources to its new technology pipeline, whose “breadth and robustness surprised us.”
Beyond a warning letter from the FDA, he said STAAR has the potential for double-digit topline growth, “given the importance of – and STAAR’s woeful under-representation in - the U.S. refractive market,” which is the second largest in the world.
At current growth levels, looking out over the next two years, Mr. Mills believes the stock is trading within range of fair value. “However if we take a longer view, we could certainly make an argument to become more constructive,” he added.
In the meantime, Mr. Mills said STAAR must achieve removal of the warning letter, deliver another year of double-digit ICL growth and gross margin expansion, setting the stage for a thrust in the U.S. in 2018-2020 with the EVO family of new-technology lenses.