RxSight Is A Potential Acquisition Target: Analyst Highlights How LAL Revenue Mix Could Drive Share Price To $45+

Needham analyst David Saxon reiterated a Buy rating on RxSight, Inc. RXST, raising the price target to $34 from $27.

The analyst applauds RxSight's improved trading liquidity, track record of beating consensus, margin trajectory, and strengthened balance sheet, contributing factors to the company's growth. 

The analyst expects an upside to utilization and margins when the company reports 2Q results.

A higher light adjustable lens, or LAL, revenue mix should drive further margin improvement in 2Q. 

The analyst believes RxSight can sustain double-digit growth driven by increased utilization across a growing LDD installed base. 

Saxon expects cash burn to improve as LALs become a more extensive total revenue mix.

RXST is seeing greater penetration into existing accounts, the analyst notes. Further, management commentary suggests new account utilization has been increasing to a higher level at a faster rate.

The analyst estimates LAL gross margins reached >75% in 1Q23 (vs. total gross margin guidance of 56-58%), which, given a higher LAL revenue mix sequentially, should drive upside to gross margins in 2Q23.

The analyst sees RXST as an attractive acquisition target and believes it could sell for >10x forward EV/sales multiple, implying a share price of $45+.

Price Action: RXST shares are trading higher by 1.17% to $31.13 on the last check Wednesday.