Stock of the Day
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Cutera (CUTR)
Cutera Bounces Back After Settling Lawsuit
The legal battle that has sent Cutera's stock price into a tailspin ended today, as the maker of laser skin treatment settled a patent infringement suit for $22 million. Almost immediately investors sent shares of the company up about 40 percent. It seems that investors and analysts alike believe the troubles are behind Cutera, despite the lowered guidance for the second quarter and the year. Will the company return to its once $44 share price and its winning ways? Or will the patent suit prove too difficult to bounce back from?
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In 2005 it seemed like nothing could go wrong for Cutera. They were expanding, they were consistently raising guidance, and their stock price was steadily increasing. Then in December, the company announced it was prepping its defense for the infringement suit that was brought against it by Palomar Medical Technology. Investors ran for the hills, sending the stock down more than 40 percent in a day. It has been steadily declining since, as Cutera's winning ways were seemingly a thing of the past. Now, considering the company has more than $97 million on hand, they can easily pay off the $22 million settlement without accumulating any new debt. And if the lawsuit continued? Some analysts believe it would have eaten up as much as 75 percent of the company's revenue.
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While the news of the settlement is all well and good, there are still some questions about the company's earnings and revenue forecasts. Cutera's meteoric rise in 2005 was built on consistently raising guidance and beating analysts' earning expectations. But for the second quarter of 2006, and the full year, there is a rather large discrepancy. For the full year 2006, the company expects earnings of 82 cents a share on sales of $68.8 million, while analysts are forecasting earnings of 94 cents a share on sales of $98.6 million. While there is still plenty of time to raise guidance and beat expectations this year, this seems a far cry from the Cutera of old.
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There is no question that executives of Cutera are pleased with the settlement of the lawsuit. As one executive explained, "Both the uncertainty associated with a jury trial, and the costly, protracted schedule of a second lawsuit and possible appeals have helped us determine that global resolution of these matters is the best solution." However, it remains to be seen whether or not the essentially reborn company can achieve the same lofty goals it set in the past. One thing we can be sure of though, is that Cutera is definitely a stock to watch in the coming months.
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Profile |
The Company's principal activities are to design, develop, manufacture and market CoolGlide products for aesthetic treatments. The easy-to-use family of laser and other light-based products enables dermatologists, plastic surgeons, gynecologists, primary care physicians and other qualified practitioners to perform safe, effective and non-invasive aesthetic procedures for the patients. The Company operates in Australia, Canada, France, Germany, Japan, Spain and the United Kingdom. The trademarks of the Company include CoolGlide(R), CoolGlide Excel(R), CoolGlide Genesis, CoolGlide Genesis Plus, CoolGlide Vantage, CoolGlide Xeo, CoolGlide Xeo SA and Cutera.
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