Needham maintains Buy on RxSight stock, price target at $43

On Wednesday, Needham reiterated its Buy rating on RxSight Inc. (NASDAQ:RXST) with a consistent price target of $43.00, following the company’s preannouncement of first-quarter revenue for 2025. The medical device company, currently valued at $1.06 billion, has demonstrated strong revenue growth of 57% over the last twelve months, according to InvestingPro data. RxSight reported $37.9 million in revenue, a 28% year-over-year increase, which fell short of the consensus estimate of $39.8 million by approximately 5%. Despite the revenue shortfall, RxSight surpassed device sales expectations by selling 73 Light Delivery Devices (LDDs), against a consensus estimate of 69, and expanded its installed base to 1,044, marking a 43% year-over-year growth. The company maintains a strong financial position with an exceptional current ratio of 11.36 and more cash than debt on its balance sheet, as highlighted in InvestingPro’s comprehensive analysis (discover 6 more key ProTips with a subscription).

The company, however, did not meet the anticipated sales for Light Adjustable Lenses (LALs), selling 27,579 units compared to the expected 30,344. Furthermore, monthly utilization declined both year-over-year by 6% and quarter-over-quarter by 13%, missing the consensus-implied utilization of 10.4. In response to these outcomes, RxSight has revised its 2025 revenue guidance downward by 12% to a range of $160-175 million from the previously projected $185-197 million.

Needham’s analysis suggested that while the company saw strong sales in its LDD placements, overall utilization rates have continued to fall short of expectations, leading to lower volumes of LALs. The guidance adjustment seems to indicate a potential further decline in utilization. Management has acknowledged that RxSight’s growth has made it more susceptible to the challenges faced by the broader premium intraocular lens (IOL) market.

The company’s fourth-quarter 2024 earnings call and the magnitude of the revenue miss and revised guidance suggest a significant slowdown in utilization later in the quarter. However, Needham noted that RxSight could potentially benefit from a competitor’s recent product recall, which may not yet be reflected in the company’s guidance. Despite the cautious stance, Needham believes RxSight’s valuation remains appealing given its double-digit growth and the prospect of near-term profitability. However, based on current market conditions and the stock’s 45% decline over the past six months, InvestingPro’s Fair Value analysis suggests the stock may be overvalued at current levels. For deeper insights, access the comprehensive Pro Research Report, available for RXST and 1,400+ other US stocks, offering expert analysis and actionable intelligence for smarter investing decisions.

In other recent news, RxSight Inc. reported its fourth-quarter 2024 earnings, revealing a notable performance with earnings per share (EPS) of $0.03, surpassing the forecasted -$0.17. The company recorded revenues of $40.2 million for the quarter, marking a 41% increase year-over-year. Despite a slight miss on revenue expectations, the company reaffirmed its 2025 guidance, projecting revenues between $185 million and $197 million, representing a 32% to 41% increase. Analysts from Jefferies, BTIG, and BofA Securities have adjusted their price targets for RxSight, with Jefferies setting it at $50, BTIG at $44, and BofA at $36, while maintaining a Buy rating. However, Stifel lowered its price target to $28, citing market conditions and maintaining a Hold rating. The company continues to focus on expanding its market reach and product offerings, with anticipated growth in the usage of its Light Adjustable Lenses. RxSight’s management expressed confidence in its path to profitability, supported by strong revenue growth and strategic initiatives.

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