How Does Cutera Stock Performance In 2020 Compare With The 2008 Crisis?

How Does Cutera Stock Performance In 2020 Compare With The 2008 Crisis?

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The stock price of Cutera (NASDAQ:CUTR), a medical devices company best known for its aesthetics systems, has rallied 54% since late March (vs. about 50% for the S&P 500) to its current level around $17. It fell to a low of $11 in late March as a rapid increase in the number Covid-19 cases outside China resulted in heightened fears of an imminent global economic downturn. The stock remains 37% below the $27 peak it reached in mid-February. Are the gains warranted? We largely think that they are, and we believe the stock is likely to partly recover in the coming quarters, as fears surrounding the pandemic are put to rest and the economic recovery picks up speed. Our conclusion is based on our detailed comparison of Cutera’s stock performance during the current crisis with that during the 2008 recession in an interactive dashboard analysis.

We see CUTR stock declined from levels of around $27 in October 2007 (the pre-crisis peak) to roughly $6 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 76% of its value from its approximate pre-crisis peak. This marked a higher drop than the broader S&P, which fell by about 51%.

However, CUTR stock recovered marginally post the 2008 crisis to about $9 in early 2010 – rising by 34% between March 2009 and January 2010. The S&P bounced back by about 48% over the same period.

In comparison, this year CUTR stock lost 59% of its value between the market peak on February 19 to the low on March 23, and has already recovered 54% since then. The S&P itself fell by about 34% and rebounded by about 50%.

The rally across industries over recent months can primarily be attributed to the Fed stimulus which largely put investor concerns about the near-term survival of companies to rest. The flattening of Covid cases in badly hit U.S. and European cities is also giving investors confidence that developed countries have put the worst of the pandemic behind them.

Cutera’s business, in particular, has been significantly impacted given that many aesthetics treatments were deferred or cancelled due to the spread of coronavirus. Thus far in 2020, Cutera has seen a 30% decline in revenues, primarily due to a 44% decline in Systems revenue, partly offset by a stellar 127% gain in Skincare sales, led by an increased customer base in Japan. A decline in sales for many companies is imminent in 2020 given the pandemic. Cutera reported a loss of $0.68 on a Non-GAAP per share basis, compared to a loss of $0.03 in the prior year period. The losses widened due to a contraction in margins, given the volume was lower with fixed costs remaining the same.

Looking forward, with the gradual easing of lockdowns and healthcare institutions working at an increased capacity, procedure volume for Cutera will likely increase, aiding both the revenues and margins in the near term. In fact, the company’s management in its recent earnings conference call stated that they anticipate a ramp up in treatments to near 90% of their pre-Covid capacity by the end of Q3 2020. Overall, CUTR stock will likely see gains in the near term given the growth in treatments, though full recovery to pre-Covid levels may still be a distance away, given the company is expected to post a loss in 2020 as well as 2021.

Over the coming weeks, we expect continued improvement in demand and subdued growth in the number of new Covid-19 cases in the U.S. to buoy market expectations. While Q3 results are expected to be better than Q2, investors will focus their attention on 2021 results – helping CUTR stock to partly recover to the pre-crisis levels, roughly 25% above the current market price.

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