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On Friday, BofA Securities adjusted its outlook on RxSight Inc. (NASDAQ: RXST), reducing the price target to $36 from the previous $60 while retaining a Buy rating on the company’s shares. The adjustment follows a meeting with RxSight’s CEO Ron Kurtz and Investor Relations Officer Oliver Moravcevic during BofA’s west coast bus tour. Currently trading at $24.90, InvestingPro analysis indicates the stock is slightly overvalued despite its recent decline, with additional insights available in the comprehensive Pro Research Report covering this medical technology company.
The firm observed that RxSight shares have fallen 61% since reaching all-time highs in June 2024, with InvestingPro data showing a significant 53% decline over the past six months. This decline is attributed to the stock’s re-rating after reporting in-line earnings for the third and fourth quarters, as opposed to the high single-digit beats seen previously. The re-rating also reflects a challenging macroeconomic climate for high-growth medical technology firms that have not yet reached profitability, evidenced by RxSight’s current EPS of -$0.71 and negative EBITDA of -$33.28 million over the last twelve months.
Despite the recent downturn, BofA Securities believes RxSight has the potential for a positive re-rating. This optimism is based on the company’s impressive 57.09% revenue growth and strong gross margin of 70.71% over the last twelve months, as reported by InvestingPro. For the stock to regain momentum, BofA suggests that investors will need to be convinced of the potential for upward revisions to financial forecasts. The company maintains a healthy balance sheet with a current ratio of 11.36, indicating strong liquidity to support its growth initiatives.
The revised price objective of $36 is now founded on a 5x multiple of the company’s estimated 2026 enterprise value to sales ratio, a decrease from the prior 9x multiple. This change reflects the significant reduction in valuation multiples among high-growth peers. Alongside the price target adjustment, BofA Securities has made slight modifications to its financial model for RxSight.
BofA Securities’ stance indicates that while they reaffirm their positive rating on RxSight stock, they also anticipate the stock may experience limited movement in the near term if the first-quarter results only meet expectations, rather than exceed them.
In other recent news, RxSight Inc. reported a strong fourth-quarter 2024 earnings performance, with earnings per share (EPS) of $0.03, surpassing the forecasted -$0.17. The company’s revenue for the quarter was $40.2 million, reflecting a 41% year-over-year increase, although it slightly missed the expected $40.39 million. RxSight reaffirmed its fiscal year 2025 revenue guidance, projecting between $185 million and $197 million, indicating a potential growth of 32% to 41%. Analyst firms have adjusted their price targets for RxSight, with Stifel lowering it to $28 and Jefferies adjusting it to $50, though both firms maintained their respective Hold and Buy ratings. BTIG also revised its price target to $44 from $58, while maintaining a Buy rating, highlighting the company’s promising revenue growth and market expansion efforts. Despite these adjustments, analysts from Jefferies expressed confidence in RxSight’s long-term prospects, particularly with anticipated approvals in international markets. Additionally, RxSight’s Light Adjustable Lenses (LALs) and Light Delivery Devices (LDDs) showed significant sales growth, contributing to an improved gross margin of 71.6% for the quarter. The company continues to focus on expanding its product offerings and market reach, aiming to capitalize on the increasing demand for its adjustable IOL technology.
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