On Friday, UBS initiated coverage on Glaukos Corporation (NYSE:GKOS), a company specializing in ophthalmic medical technology and solutions, with a Buy rating and a price target of $182.00. Currently trading at $135.70, the stock has demonstrated remarkable momentum with a 117.89% return over the past year. According to InvestingPro data, analyst consensus remains bullish, with targets ranging from $115 to $162.
Glaukos currently trades at a significant premium of 16 times enterprise value to sales (EV/Sales), compared to the average of 6 times for its high growth small to mid-cap (Smid-Cap) medical technology peers. InvestingPro analysis indicates the stock is currently trading above its Fair Value, with a Price/Book ratio of 11.19x.
UBS justifies this premium by pointing to the company's projected high-20% compound annual growth rate (CAGR) through 2028, supported by the company's strong revenue growth of 18.7% over the last twelve months. This growth is expected to be driven by what UBS believes to be one of the most disruptive product launches in the field of interventional glaucoma.
UBS's projections are based on a reverse discounted cash flow (DCF) model, which indicates that the current stock price factors in a 20% five-year revenue CAGR from 2024 to 2029, which is below UBS's own estimate of 27%. The firm anticipates that Glaukos's iDose product, designed to treat glaucoma, will significantly contribute to this growth. Their sales estimates for iDose are set at $115 million for 2025 and $236 million for 2026, which is already above the consensus.
The anticipated success of the iDose product is supported by several factors. Firstly, key opinion leader (KOL) checks suggest a rapid adoption due to the product's low burden and effectiveness as a therapy. Secondly, the total addressable market (TAM) for iDose is broader, as it can cater to the full spectrum of glaucoma severities and offers a reduced burden on both patients and healthcare providers.
The company maintains a strong financial position with a current ratio of 5.54 and operates with a moderate debt level, as revealed by InvestingPro's comprehensive analysis, which includes 8 additional key insights available to subscribers. Lastly, Glaukos has an established commercial organization in the US glaucoma market, which further supports the potential for iDose's success.
In addition to iDose, UBS also expects sustained growth from Glaukos's legacy stent franchise. While this growth might be slower, the introduction of the iStent Infinite is anticipated to expand its adoption into the standalone market, which includes approximately 200,000 eyes with advanced and refractory glaucoma.
In other recent news, Glaukos Corporation has reported a 24% increase in its third-quarter net sales, reaching $96.7 million, primarily due to a 35% rise in U.S. glaucoma franchise sales. This positive development has led the company to raise its full-year 2024 sales guidance to between $3.77 million and $3.79 million. On the other hand, Glaukos has entered into agreements to partially unwind specific capped call transactions related to its convertible senior notes, a strategic move in managing its financial instruments.
In the world of financial analysis, Stifel has increased its price target for Glaukos shares to $153.00, maintaining a Buy rating, driven by optimism for iDose sales. The firm noted significant growth in the number of iDose-trained surgeons, suggesting potential for sales to surpass the $100 million estimate set for 2025. Conversely, Morgan Stanley (NYSE:MS) downgraded Glaukos from Equalweight to Underweight, citing valuation concerns despite recognition of the company's strong product cycle and robust pipeline.
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