Canaccord Genuity raised its price target for Endologix (NASDAQ:ELGX) to $7 from $5.75 but maintained a “hold” rating. The stock closed at $7.34 on May 4.
Analyst Jason Mills writes that while Endologix’s first quarter revenue beat consensus, the company lowered second quarter guidance to a range of $47-million to $48-million from an earlier forecast of $50-million.
Endologix cited a slower than expected roll-out of AFX2 lot testing remediation, coupled with share loss estimates rolling through 2017, as a result of supply/CE Mark issues for AFX, offset to some extent by strong momentum with the acquired Ovation (TriVascular) franchise, which is “increasingly looking like it could ultimately prove to be the firm’s workhorse product long-term,” Mr. Mills said.
While a $170-million credit facility mitigates material capital risk in the near term, he said cash flow burn rates exceeded management’s guidance in the first quarter, which admittedly tends to be the heaviest burn quarter.
Mr. Mills recommends investors stay on the sidelines, as “we continue to see a mature, no-growth TAM; tough competition, which can compete on price, product portfolio breadth and/or long-term data (read: risk sharing); coupled with uncertainty around the Nellix approval timeline, relatively flat market growth, and tepid gross margin trends,” he added.
