Buy Cynosure
Makeover your portfolio with Cynosure. The company develops non-invasive and minimally invasive aesthetic treatments. Its launch of the SculpSure product (non-invasive laser treatment for fat removal) last September is boosting profits. SculpSure’s rave reviews and high patient satisfaction is making it popular with doctors.
Cynosure’s has sold hyperthermic laser treatments for over 25 years and has a portfolio of tattoo removal, skin rejuvenation and gynecological products.
Profits rose 22% in the first half of the year and are expected to rise 24% for the year. Fiscal 2017 is expected to usher in 40% growth as sales take off. Although the stock is up 24% year to date we think it could jump another 25% to our $65 target.
Target $65
Stock Talk
Jon D.
Hi Linda,
Guess we could say, “what have I got to lose”?
Just to play it safe I think I will time my entry to Wed, I think is ‘Fed Day’ this week?
This may guarantee a lower entry price, as traders ponder the rise or fall of interest rates.
I notice that the combined 9/9 and 9/12 formed a Bullish Engulfing in Candle Speak, which has raised price about 2 standard deviations. Its looking like another CUP Formation! RSI is in uptrend territory. Macd looks gooded. PPO has followed suit. http://schrts.co/GQJS0J
Linda McDonough
Jon,
As always thanks for the comments on the technical side. As you can imagine the puns are hard to come by when the numbers are expanding but waistlines are shrinking. Ah, a perfect inverse correlation on this one!
Best,
Linda
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Guest User
Hello Linda,
Quick question. I was wondering why the huge fall in price of CYNOSURE despite beating 3Q forecast and posting increased revenues up to 36%…people selling their profit? and also is this a good entry point? Thank you
Linda McDonough
The decline in Cynosure after its earnings release has me scratching my head. Revenue beat by $5 million and earnings were 3c better. The company never gives guidance but was very upbeat on future growth- management actually said the momentum was improving for its products. The only issue with the quarter was a drop in a balance sheet account called deferred revenue, which represents payments for pre-orders of products that haven’t been delivered yet. This number started climbing after the release of the SculpSure introduction in September 2015 when the company started taking orders. Now that the product is widely available, most orders are filled in the same quarter in which they are received which means they do not pile up in deferred revenue.
Healthcare stocks in general are getting squashed across the board. Several Pharmacy Benefit Manager (PBMs) companies and drug stocks have noted pricing pressure on drug pricing from insurance companies. Part of the reason we like Cynosure so much is its extremely limited exposure to insurance reimbursement. The stock trades at 24 times its 2017 estimate of $1.80, a very low valuation for a company growing earnings 40%.
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cj
Are you still recommending this stock it has dropped below your stop loss. Wouldn’t you then be selling.
Linda McDonough
Hi CJ-
The stop loss is a price where I recommend selling half your position. If the fundamentals hold up, which my research shows they do, I keep the stock in the portfolio. I continue to track competitors and work through industry numbers which indicate good growth for Cynosure. I believe the decline is due entirely to a drop in the company’s deferred revenue, which is due to faster installation of customer systems.
Best,
Linda
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