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Why Cutera, Inc. Is Tumbling Today

Woman having a tattoo removed with a laser

What happened

Shares of Cutera (NASDAQ: CUTR) , a laser maker that services the aesthetics market, fell 16% as of 10:50 a.m. EDT on Wednesday. The selling pressure can be traced to second-quarter results and guidance that fell short of expectations.

So what

Here's a look at the key figures from Cutera's second quarter:

  • Revenue grew 17%, to $42.6 million. The increase was driven by a 16% sales jump in the states and 19% growth in international markets.
  • Gross margin declined by 500 basis points, to 53%. Management blamed the downfall on lower average selling prices on its legacy products and increased sales to distributors.
  • Non- GAAP net income was $1.8 million, or $0.12 per share. This figure was well shy of the $0.18 in earnings per share (EPS) that Wall Street was expecting. The miss is partially attributable to the company's lower-than-hoped-for gross margin.
Woman having a tattoo removed with a laser

Image source: Getty Images.

Management also took the opportunity to adjust its guidance for the full year. Here's what the updated expectations look like:

  • Revenue is expected to land between $178 million and $181 million. This represents year-over-year growth of 18% to 20%.
  • Gross margin is expected to land between 53% to 54%. This is a 400-basis-point reduction from its prior guidance. However, the company stated that it expects gross margin will improve as the year progresses.
  • Operating expenses are expected to land between 56% and 57% of total revenue. This is much high than the company's prior guidance range of 52% to 54% of total revenue.
  • Non-GAAP earnings per share are expected to land between $0.50 and $0.60. This is a substantial pullback from its prior guidance range of $1.03 to $1.11.

Given Cutera's weaker-than-expected quarterly profitability and substantial reduction in its full-year EPS estimate, it isn't hard to figure out why its stock is selling off today.

Now what

Cutera's quarterly results and guidance weren't pretty, but the company's near-term margin problem appears to be fixable. The company also sports a debt-free balance sheet and continues to launch new products that should resonate with the fast-growing aesthetic community .

Overall, I think that long-term bulls continue to have reason to remain optimistic. With shares currently trading at a substantial discount to their 52-week high, right now might be a good time for opportunistic investors to give this stock a closer look.

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Brian Feroldi has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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