Looking at EYE More Positively

An update has just come out today on Advanced Medical Optics, Inc. (EYE), in which senior medical products analyst Tom Park is upgrading his rating to Hold on the company.  We excerpted the following details:

"Based on valuation, we raised our recommendation to a Hold. AMO announced a new CFO, the launch of a global campaign to educate contact lens wearers about proper lens cleaning, and a U.S. patent licensing agreement with Carl Zeiss Meditec AG. AMO is scheduled to report Q3 results on October 25.

"We previously lowered our FY07 sales and EPS estimates. Due to another recall of the COMPLETE MoisturePlus multi-purpose solution, management previously reduced its 2007 & 2008 guidance, which was reiterated at the end of Q2. AMO began the launch of another version of the COMPLETE multi-purpose solution with guidelines that emphasize following a rub and rinse regimen to effectively clean and disinfect the lens in Q3. Our price target is based on roughly 20x FY08 EPS estimate.

"At its current price of $29.78 per share, AMO is trading at roughly 19x our 2008 earnings estimate of $1.58 per share and roughly a 1.0x P/E/G on 2008 EPS estimate, at a discount to the peer group P/E multiple of roughly 20x and also at a discount to the group 2008 P/E/G of roughly 1.2x. Growth in 2007 is depressed by the lost sales and incremental costs related to the May 2007 recall of the COMPLETE multi-purpose solution and further on the dilutive impact of the IntraLase acquisition.

"Growth in 2008 is also expected to be negatively impacted by the recall. Given the risk and reduced growth, we believe the stock is fairly valued around a 1.1x P/E/G or roughly 20x our 2008 EPS estimate. Our price target moves to $32.00."

Read the full analyst report on EYE.

Read the full analyst report on EYE