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Same Target for VNUS
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VNUS Medical Technologies (VNUS) missed our second quarter revenue estimate and $0.06 loss per share estimate. The company reduced 2006 guidance. We are lowering our estimates on competition, sales force issues, and a lower gross margin outlook due to heavier discounting.
At the current price, VNUS trades at 1.8x 2007 revenues, a discount to the 2.5x group average and a discount to the industry averages. Given the losses and continued competition headwind, we believe a discount is appropriate. At 2.0x 2007 revenues, a 20% discount to the group and a discount to the industry averages, our target remains at $7.50.
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