Northland Analyst: Spectranetics Guidance 'Sets Off Alarm Bells...'

Shares of Spectranetics Corp SPNC are down more than 33 percent after the company reported its second quarter results on Thursday evening. The stock is tumbling despite a beat in earnings, on the back of a guidance cut.

Management trimmed its full year 2015 revenue guidance to a range of $240 million to $250 million, down from $258 million-$265 million.

In a report issued Friday, Northland analyst Suraj Kalia reiterates a Market Perform rating and $25.00 price target on the stock, warning that the cut guidance “sets off alarm bells.”

The firm’s main concerns are:

1) The lowered guidance for 2015.

2) Lead Management (LM) business growth guidance of 1 percent to 4 percent (down from 8 percent – 10 percent)

3) No more ISR guidance.

The report highlights a few other key points:

• 4 quarters into its launch, ISR metrics show weak adoption.
• In the first quarter, “something was off in the VI biz,” the analysts assure. In the second quarter, LM & AngioScore were soft.
• Management provided no details regarding hospital versus OBL business segments.
• Northland’s recent field checks continue to point to high inventory levels in the OBL setting, which makes the experts “worried about future lumpiness in ordering patterns. The entire push in VI is from the OBL biz, and if reimbursement changes to the downside, we worry that it will have a multiplier effect on Spectranetics,” they add.
• Finally, the analysts point out that “the metamorphosis into an angioplasty company increases risk of lower overall ASP’s + margins, cutthroat competition, higher spend, lack of leverageability, & dilutive capital raises.” Therefore, the firm remains negative on fundamentals.