Canaccord Genuity upgraded STAAR Surgical (NASDAQ:STAA) to “buy” from “hold” and raised its price target to $15 from $11, suggesting a resolution to a FDA warning letter soon. The stock closed at $10.90 on Sept. 22.
STAAR specializes in ophthalmic devices targeting two segments: intraocular lenses for cataracts and implantable collamer lenses for refractive correction. The warning letter in February 2015 concerned compliance with good manufacturing practices at a plant in California.
“We recommend small-cap investors begin to build positions in STAAR ahead of accelerating growth and gross margin expansion, in our estimation, as we expect a resolution to the warning letter soon,” writes analyst Jason Mills.
Canaccord recently hosted STARR’s CEO and CFO for client meetings and “we come away from these discussions with increased confidence in STAAR’s growth strategy going forward, and continue to believe the business model is on the cusp of an inflection.”
Mr. Mills suggests that this management team has done a very good job over the past two-plus years building a stronger foundation for the firm, including a complete quality system overhaul and significant innovation and product development, laying the groundwork for accelerating top-line growth once the warning letter is lifted, which “we believe will allow STAAR to replicate its successful business model in China here in the U.S.”
In addition, he believes management has constructed a strong product pipeline and clinical database that can support much faster growth and profitability into the next decade.
