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Excellent Dow Jones Article on Visx today. Below is a note that I posted on AOL's MF.
Today's Dow Jones article is extremely positive. It sounds like something I would write about Visx. I would suggest everyone get a copy and read it, but here is a quick and incomplete summary:
It starts out "VISX's future is looking brighter." It then goes on to mention analysts and portfolio managers see a rebound of the stock to as high as $45 over the next 12 to 18 months.
It states, "five analysts rate the stock a buy, two are neutral, and one bear rates it a sell" (Anne Anderson). It quotes several analysts and one says Visx stock may have been tainted because of association with Summit. Also, many were hoping for 125,000 procedures for 96, instead of the now anticipated 70,000 (although Visx has stated 70,000 for 96 all along). Stated projected 97 earnings 40% over 96 estimates, and 5 year earnings growth averaging 31% annually. Says Anne Anderson downgraded Visx to a sell from a hold in April, when the stock was at $34/sh. Says she doesn't believe royalties will meet expectations and expects equipment sales to decline from 3rd quarter levels. What the article failed to mention is that Anne Anderson (more than likely) has a large short position in the stock, and one that was (judging by the increases in monthly short interest) mainly opened in the mid 20's, and not the 30's. The article also didn't mention that the current short interest is around 2 million which could add fuel to Visx's stock rise.
One interesting comment was that the FTC has investigated PPP twice, once in 92 and again last year -- and declined to take action. It quotes an analyst as saying even if PPP were dissolved, Visx would be able to collect considerable fees from the use of its machines. The article also mentions Visx's strong cash position of $85 million and no debt. It ends with a quote from Mark Logan who disagrees with Anne Anderson's comments and says royalty fees will increasingly drive the company, and states "we would never make money on the equipment because we chose to sell it below cost" in order to boost market penetration. This last bit from Logan must be taken somewhat out of context since everyone knows that Visx has had about a 60% margin on machine sales the last two quarters. I believe what Logan is saying is that the real cost of the machine is coming from the per procedure fees allowing the machine to be sold at $525,000 instead of $2 to $3 million.
In any event, the article is extremely good press for Visx. I believe a major short squeeze is soon coming in Visx as the future for PRK seems to be back on the rise, and I believe we will start to see some big money start chasing the stock. Then, we will also probably see some short covering come in to make the rise all that more swift. I remember last year when Visx got the letter of approvability (you know the one that was illegally sent to Muller as well), around that time several analysts started putting out 12 month targets of $30 to $33, $35, and $40/sh for the stock and it hit $35 to $40/sh within a few weeks. I believe that the good press is now finally back behind the stock and we will see a repeat, except this time the rise might be even faster as now 2 million shares (out of 15 million) are short. How can Anne Anderson argue against all the good news that should be forthcoming? How do you put a negative spin on 40% earnings growth for next year? And a 5 year average annual growth of 31%? I for one think that this maybe the best time in all the years I have followed Visx to buy the stock. |
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