On Friday, Stifel, a financial services firm, adjusted its outlook on Cutera (NASDAQ:CUTR), a provider of laser and other energy-based aesthetic systems. The firm lowered the price target for Cutera's shares to $6.00 from the previous $10.00, while still maintaining a Buy rating on the stock.
The revision follows Cutera's fourth-quarter 2023 revenue report, which aligned with the company's preannouncement at $49.5 million, surpassing Stifel's estimate of $42.3 million.
Cutera closed the year with approximately $144 million in cash reserves and anticipates a significant reduction in its cash burn for the fiscal year 2024, projecting a decrease of nearly 50% compared to the previous year. This expected reduction is particularly notable in the second half of 2024.
Despite these positive indicators, the company's non-GAAP Gross Margin (GM) for the fourth quarter stood at 20%, impacted by an inventory obsolescence charge exceeding $8 million. Even after adjusting for this charge, the normalized GM of around 37% still showed a considerable year-over-year contraction.
The company's performance in the latter half of 2024 is deemed crucial by Stifel. During this period, it is expected that Cutera's U.S. relaunch of AviClear, its acne treatment device, will need to demonstrate significant market uptake, along with a growing momentum for AviClear in international markets.
Additionally, the company's base business is anticipated to see improvement as it benefits from easier comparisons with the previous year, the integration of new sales representatives, and a revitalized product portfolio.
Stifel emphasizes the importance of these improvements for Cutera to successfully navigate a turnaround. Enhanced gross margins and better inventory management are key factors that could help moderate the company's cash burn.
These changes are considered necessary for Cutera to reach a cash-flow breakeven point, which is projected to occur in late 2025 or 2026.
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