UPDATE: Credit Suisse Upgrades Volcano On Multiple Positive Factors

In a report published Monday, Credit Suisse analyst Bruce Nudell upgraded the rating on Volcano Corporation VOLC from Neutral to Outperform, but lowered the price target from $16.00 to $14.00. In the report, Credit Suisse noted, “Our VOLC upgrade is based on 3 factors: 1) the belief that VOLC's August long-term sales growth targets are likely achievable (if not beatable), suggesting limited downside to consensus (which assumes 1.8% sales growth in 2015 roughly consistent with 2014 growth despite multiple new product launches & the lapping of Japanese price cuts to help offset FFR competition), 2) VOLC's more dedicated approach to margin expansion suggests a meaningful intermediate-term profitability ramp & seems to mitigate the risk from M&A execution, & 3) favorable valuation (as described below). We're lowering our 2015 sales estimates to $408.3M (5.4% CC) from $417.2M (7.6% CC) on lower assumed FFR share & the assumption of increased pricing pressure (we've assigned ~2% FFR share to ACIST in 2015, increasing over time), which implies a lowering of our 2014-17 total sales CAGR to 5.0% from 6.4%; however, we still believe there's likely to be nice potential upside to shares if VOLC can meet our above-consensus sales targets. We're lowering our DCF-based price target to $14 from $16 on our lowered estimates.” Volcano closed on Friday at $10.92.