Piper Jaffray Remains Buyers Of Accuray Inc. Ahead of Q2 Results

Piper Jaffray remains buyers of Accuray Inc. ARAY ahead of the company's FQ2 results scheduled to be released on Thursday evening. Piper believes there are a number of reasons to be optimistic about ARAY's future at present, including an improving US capital spending backdrop, potential upside from recent strategic alliances, expanded regulatory approval in critical markets and maturing clinical data to support gradual long-term penetration in key applications like lung and prostate. Piper remains comfortable with its FQ2 estimates which call for revenues of $48.4 MM, slightly shy of consensus at $49.7 MM. It is forecasting gross margin expansion of approximately 270 bps YoY to 48.0% with profitability improvements anticipated in both the company's product and services operating segments. Piper's earnings estimate of -$0.04 is below consensus at -$0.01, though it believes upside to the number is possible. We remain buyers of the stock at current levels and believe that ARAY has truly established itself as the leader in the fast growing radiosurgery market. At current levels, shares of ARAY are trading at approximately 1x Piper Jaffray's FY12 EV/REV estimate and it believes further multiple expansion is possible in the coming quarters as the economic backdrop continues to improve and end-user demand for revenue generating capital equipment accelerates. Piper has an $8 PT and Overweight rating on ARAY ARAY is trading higher at $6.91