Stifel initiated coverage of IRIDEX (NASDAQ:IRIX) with a “buy” rating and price target of $9. The stock closed at $5.40 on Oct. 25.
IRIDEX is a leader in developing, manufacturing, and marketing laser-based medical systems, delivery devices and consumable instrumentation for the ophthalmology market.
“Our diligence identifies increasing traction for Cyclo G6, which we do not believe is properly reflected in the stock’s current valuation,” writes analyst Jonathan Block.
G6 utilizes IRIDEX’s proprietary MicroPulse technology, which delivers laser energy using a mode that chops continuous wave laser beams into short, microsecond-long pulses in order to achieve a therapeutic response, while minimizing damage to tissue in the eye, he added.
Mr. Block said a high margin recurring revenue opportunity accompanies the G6 model, and “we expect G6 will achieve a 2017-2022 compound annual growth rate in revenue of 30%-plus.”
IRIDEX is beginning to experience increasing G6 traction, with first half 2018 probes up more than 69% year over year, and “momentum building in the U.S. and significant opportunities abroad,” he said.
While the company’s Retina business has been under pressure, Mr. Block said the division’s contribution should steadily decline, with Retina accounting for 29% of 2022 gross profit.
