IRIX - Iridex stock falls 7% as Stifel sees limited potential volume upside for glaucoma system

Stifel research has downgraded its rating on eye-laser procedures company Iridex ( NASDAQ: IRIX ) to hold from buy, citing limited potential volume upside in H2 for the firm's Cyclo G6 platform to treat glaucoma.

Shares of the micro-cap company fell 7% to $2.65 in Friday early trading. Stifel cut its price target on the stock to $3 from $5, representing a 4.9% upside to the last closing price.

The downgrade was "supported by survey diligence of 23 ophthalmologists that utilize (IRIX's) Cyclo G6 system," Stifel analysts Thomas Stephan and Jonathan Block wrote in a research note on Thursday.

"For the near term, our checks point to limited potential G6 procedure volume upside in 2H22, where recently-lowered probe guidance also is still higher than historical seasonality," the analysts said.

"Looking ahead, we believe 2023 estimates are more at risk as G6 may stall, with the (survey) respondents expecting flat-to-down 2023 G6 procedure growth," the analysts added.

Iridex ( IRIX ) last week reported Q2 results in which it said its Cyclo G6 product family revenue fell 3% Y/Y to $3.5M, while Cyclo G6 probes sold also decreased 6% Y/Y to 15K.

The Stifel analysts said that the long-term outlook for G6 has become even more challenging.

"G6 has seemingly been out-innovated, few doctors believe its role will increase three years from now, and users seem reluctant to recommend purchase by other ophthalmologists," Stifel's Stephan and Block said.

Stifel's hold rating on IRIX stock compares to a Wall Street average rating of buy. Seeking Alpha's Quant system, which consistently beats the market , rates it strong sell .

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