Iridex (NASDAQ:IRIX) stock drops as analysts anticipate a challenging long-term outlook for the year.

Iridex (NASDAQ:IRIX)

Iridex (NASDAQ:IRIX), a provider of eye laser operations, has had Stifel Research lower its recommendation from buy to hold, noting limited potential volume growth in H2. The company uses its Cyclo G6 platform to treat glaucoma.

In the opening hours of Friday trading, shares of the micro-cap business dropped 7% to $2.65. The stock’s price objective was lowered by Stifel from $5 to $3, which corresponds to an increase of 4.9% over the most recent closing price.

In a research note published on Thursday, analysts Thomas Stephan and Jonathan Block of Stifel noted that the downgrade was “supported by survey analysis of 23 ophthalmologists that deploy (IRIX’s) Cyclo G6 system.”

The freshly revised probe projection also remains higher than historical seasonality in the second half of 2022, when the analysts noted their checks indicate a limited potential G6 procedure volume upside.

The analysts continued, “Looking ahead, we feel 2023 projections are more at risk as G6 may stall. The (survey) respondents expected flat-to-down 2023 G6 procedure growth.

Iridex’s (IRIX) second-quarter earnings

Iridex (IRIX) posted second-quarter results last week with total revenue of $13.8 million, an increase of 2% over the corresponding period in the previous year. Gross Margin increased from 45.5% to 45.6% over the same time last year. $3.5 million in revenue for the Cyclo G6® product family, a 3% year-over-year decline. 15,000 Cyclo G6 probes were sold, a 6% year-over-year decline and a 2% quarter-over-quarter gain. 48 Cyclo G6 Glaucoma Laser Systems were sold, up from 47 in the same period last year.

According to the Stifel analysts, the long-term picture for G6 has grown increasingly difficult. As per Stifel’s Stephan and Block, “G6 has seemingly been out-innovated, few physicians feel its role will expand three years from now, and users seem reluctant to encourage purchase by other ophthalmologists.”

IRIX stock currently has a hold recommendation from Stifel, compared to an average buy rating on Wall Street. It is rated a heavy sell by Seeking Alpha’s Quant system, which typically outperforms the market. 

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