Writing about Syneron (ELOS) brings back fond memories. My first trade in ELOS was almost 4 years ago, on 10/19/2004, for 100 shares at $20.48. I sold the stock 2 weeks later at $26,861 for a 31.15% return, making a profit of $638.10 (woo hoo!). In 2004-2005, stocks hovered between $1 and $2 intraday, several times a week (but not anymore). ELOS was the perfect very short term trade, giving me the opportunity to trade ELOS 18 times in the next 12 months. Those were the days.
On Thursday, August 14, before the market opened, ELOS reported second quarter 2008 earnings of $0.40 per share or $11 million (up 7%) on $38.2 million in revenue vs. $0.37 per share or $10.3 million a year ago. Excluding compensation (stock-based), ELOS earned $13.7 million or $0.50 per share. Analysts had expected $0.32 per share (excluding items, including compensation) on $37.1-$37.6 million in revenue, beating profit and revenue targets.
This was primarily driven by a 17% increase in international sales to $19.1 million. International and US sales each represent 50% of total revenue. ELOS increased its cash position by 5% to $220.6 million while reducing marketing expenses by 10% to $14.3 million. What I love about ELOS, and also CLZR and CUTR, is that they all have zero debt.
The stock reacted in the morning with a gap of $0.74, opening at $16.52, reaching a high of $17.25 and selling off throughout the day to close at $15.89, or up $0, eleven.
ELOS was able to capture 15% of the non-aesthetic medical market in 4 years (currently more than 20%) and its installed platforms now total more than 6,000 units worldwide. The company’s elMs(TM) technology combines bipolar RF and optical energy (lasers) for cosmetic treatments including fat reduction, whitening, skin tightening and rejuvenation, wrinkle reduction, leg vein reduction and other non-invasive treatments. Headquartered in Israel, they have global headquarters in the US, Canada, Germany and Hong Kong.
LipoLite(TM), a fat reduction device, launched at the end of the quarter and management expects significant sales of the device. ELOS also implemented LEAP (LipoLite Energy Access Program), which is a cost-effective annual subscription (fee: $30,000) offered to all physicians to take advantage of using the device for lipolysis treatment. This program is favorable to physicians as it reduces the up-front costs and risks associated with a long-term lease lock-in period.
Despite the economic conditions in the US, I continue to expect ELOS to benefit from a growing global demand for healthcare, meeting physicians’ needs for non-invasive technology, a growing population of people 55 and older, and a solid base of high level patients. . ELOS has the largest market capitalization ($438.8 million) among competitors, as well as the highest percentage return on revenue (22%) within the medical laser industry.
Currently, the 6 analysts who publish reports on ELOS recommend 2 “Buy” ratings and 4 “Hold” ratings. Over the last 3 months, there has been a +6.7% net change in institutional ownership with a net purchase of 1.94 million shares.
Technically, ELOS is near all-time lows since the IPO in 2004. For the past 10 months, ELOS has been trading in a neutral range of $13-$18. A break above $18 is considered bullish and confirms a new uptrend, while a break below $13 suggests a continuation to the downside. The MACD indicates an uptrend, while the RSI is neutral. Sitting above the 50 and 200 day moving average, ELOS is in a better position to break but still remains range neutral.