SGHT - Sight Sciences: Staying Bullish After Q2 Results Beat

2023-08-07 14:00:05 ET

Summary

• Sight Sciences' Q2 2023 financial performance came in above Wall Street analysts, and SGHT's stock price rose by +7.6% last Friday following its results announcement.
• SGHT's key markets, glaucoma and dry eye, have addressable markets worth billions of dollars.
• I retain a Buy rating for Sight Sciences, as its above-expectations second quarter results give me the confidence that SGHT can realize its full growth potential in time to come.

Elevator Pitch

I still rate Sight Sciences, Inc. ( SGHT ) as a Buy. My prior May 30, 2023 write-up was focused on SGHT's first quarter financial performance and the stock's valuations.

With my latest article, I turn my attention to Sight Sciences' recent Q2, 2023 financial results announcement. I continue to have a bullish view of SGHT, as the company's Q2 2023 results beat suggest that it remains on track to realize its long-term growth potential. Sight Sciences is in a good position to deliver positive revenue expansion in the twenties percentage range for the next few years by progressively grabbing a larger share of its TAM (Total Addressable Market).

The Sell-Side's Expectations Of SGHT's Second Quarter Results

The market was anticipating that Sight Sciences will deliver positive top line expansion and narrower losses in the second quarter of the current year, before the company reported its actual Q2 results on August 3, 2023.

According to the analysts' consensus financial numbers , SGHT's revenue was projected to increase by +29.3% YoY and +18.3% QoQ to $22.3 million for Q2 2023. Separately, the sell-side forecasted a narrowing of Sight Sciences' EBITDA loss from -$17.4 million for Q1 2023 to -$15.9 million (source: S&P Capital IQ ) in Q2 2023. Also, SGHT's Q2 2023 normalized net loss per share was estimated to be narrower at -$0.33, as compared to the company's bottom line of -$0.35 per share and -$0.50 per share for Q1 2023 and Q2 2022, respectively.

In the subsequent section, I highlight how Sight Sciences' actual second quarter financial performance compared against the market's expectations.

Sight Sciences' Q2 Top Line And Bottom Line Surpassed Expectations

SGHT disclosed its Q2 2023 results with a press release issued last Thursday before trading hours. In the second quarter of this year, the company achieved stronger revenue growth and a smaller net loss than what analysts had predicted.

Sight Sciences' actual second quarter revenue of $23.5 million was +5.4% higher than the sell-side's consensus top line forecast. SGHT's most recent quarterly sales were equivalent to QoQ and YoY growth rates of +24.7% and +36.2%, respectively.

At the company's Q2 2023 results call on August 3, SGHT attributed its above-expectations top line expansion in the recent quarter to the fact that its "surgical glaucoma business growth continued to outpace the MIGS (Microinvasive Glaucoma Surgery) market overall as more clinicians adopted our OMNI technology." In specific terms, the number of client accounts which purchased Sight Sciences' surgical glaucoma offerings increased by around 30% YoY to approximately 1,100 in the second quarter of 2023.

The company also witnessed much narrower losses for the most recent quarter. Sight Sciences' actual Q2 2023 EBITDA loss and non-GAAP adjusted net loss per share were -$15.0 million and -$0.30, respectively. As mentioned in the preceding section, the market had expected SGHT to register larger EBITDA losses and normalized net losses of -$15.9 million and -$0.33, respectively in Q2 2023.

Sight Sciences cited "operating leverage" and its efforts to control "operating spend" as the key factors contributing to the company's Q2 bottom line beat at its second quarter results briefing. Operating costs for SGHT declined by -5.6% from $37.4 million in the second quarter of last year to $35.3 million for the most recent quarter. During this same time period, Sight Sciences' top line expanded by +36.2% YoY to $23.5 million. This is a clear indication that SGHT is benefiting from its cost optimization measures and positive operating leverage.

Investors had a very positive view of SGHT's Q2 2023 results beat, as Sight Sciences' share price jumped by +7.6% on August 4, 2023, the next day following the company's second quarter results release.

Favorable Growth Outlook

SGHT is leaving the company's full-year FY 2023 top line guidance of between $89 million and $94 million unchanged after reporting its Q2 results. This translates into a mid-point revenue guidance of $91.5 million, or an implied sales growth rate of +28.3%, for the current year.

Looking beyond this year, the Wall Street analysts forecast that Sight Sciences can continue to achieve robust revenue growth rates of +26.8% and +27.2% (source: S&P Capital IQ ) for FY 2024 and FY 2025, respectively.

The favorable growth prospects for Sight Sciences are supported by the fact that SGHT's current revenue represents a mere fraction of the TAM for its products.

In the first half of 2023, SGHT generated $38.7 million and $3.6 million of sales from the company's surgical glaucoma and dry eye products, respectively, as indicated in its Q2 results press release. In comparison, the TAMs for glaucoma and dry eye are estimated to be $6.0 billion and $2.5 billion, respectively, based on third-party projections cited in SGHT's August 2023 investor presentation slides .

It is fair to say that SGHT is in the early innings of growth based on a comparison of its current revenue with the TAM estimates.

Closing Thoughts

I maintain my Buy rating for Sight Sciences. SGHT's Q2 2023 results beat, its unchanged fiscal 2023 financial guidance, and the analysts' consensus financial figures, indicate that the company has a reasonably strong growth outlook. More significantly, SGHT has a long growth runway, considering its large TAM.

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