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Here's Why You Should Retain Glaukos (GKOS) Stock for Now

·4 min read

Glaukos Corporation GKOS is well poised for growth in the coming quarters, backed by its strategic alliances over the past few months. A solid first-quarter 2021 performance, along with progress in its iStent product line, is expected to contribute further. However, stiff competition and regulatory concerns persist.

Over the past year, this Zacks Rank #3 (Hold) stock has gained 93.8% compared with 16.9% growth of the industry and 42.4% rise of the S&P 500 composite.

The renowned ophthalmic medical technology and pharmaceutical player has a market capitalization of $3.58 billion. The company projects 35.9% growth for 2022 and expects to maintain its strong performance. Further, it has delivered an earnings surprise of 56.49% for the past four quarters, on average.

Let’s delve deeper.

Strong Q1 Results: Glaukos’ robust first-quarter 2021 results buoy optimism. The company recorded an improvement in revenues in the quarter. Gross margin expansion bodes well for the company. Per management, a strong start to 2021 highlights the company’s focus on acceleration of its key strategic priorities and execution of plans. Despite pandemic-led uncertainties, sustained recovery trends and solid business prospects instil optimism on the stock.

Strategic Alliances: We are optimistic about Glaukos’ latest development and commercialization license agreement with Santen Pharmaceutical in May for the PRESERFLO MicroShunt. Glaukos, per the terms of the new agreement, will obtain exclusive commercialization rights for the MicroShunt in various geographies, as well as full control over all development activities for the product.

In April, Glaukos entered into an amended licensing agreement with Intratus. Per the agreement, Intratus has granted the former a global exclusive license to research, develop, manufacture and commercialize its Eyelid Drug Delivery Platform for application in the treatment of presbyopia.

Strength in iStent: Glaukos’s progress with its iStent product line raises our optimism on the stock. The company advanced the U.S. commercial rollout of the iStent inject W, offering the same safety and efficacy of iStent inject but with added benefits, during the first quarter of 2021. During the same time, Glaukos also advanced the commercial rollout of iStent inject W in key international markets like Australia, Japan and several European countries. The product has received stand-alone indication approval in Australia and regulatory approval in India, along with registering continued progress across many of the key market access initiatives.

Downsides

Regulatory Concerns: Glaukos’ combination products or other products are subject to extensive government regulations in the United States as well as in other countries in which the company operates. The process of obtaining approvals to market its products can be expensive and lengthy, and it cannot be guaranteed that Glaukos’ current products will receive approval for additional indications or that its future products will receive clearance or approval on a timely basis, if at all.

Stiff Competition: Glaukos operates in a tough competitive landscape, which includes many companies, as well as divisions of larger companies having greater resources and recognition, and smaller companies that compete against specific products or in certain geographies. Further, the company’s present or future products could be rendered obsolete due to advances by one or more of its present or future competitors or by other surgical or pharmaceutical therapy developments.

Estimate Trend

Glaukos is witnessing a positive estimate revision trend for 2021. In the past 90 days, the Zacks Consensus Estimate for its loss per share has narrowed from a loss of $1.12 to a loss of 92 cents.

The Zacks Consensus Estimate for the company’s second-quarter 2021 revenues is pegged at $71.3 million, suggesting a 125.9% surge from the year-ago quarter’s reported number.

Key Picks

Some better-ranked stocks from the broader medical space are Illumina, Inc. ILMN, DaVita Inc. DVA and Amedisys, Inc. AMED, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Illumina’s long-term earnings growth rate is estimated at 7%.

DaVita’s long-term earnings growth rate is estimated at 14.4%.

Amedisys’ long-term earnings growth rate is estimated at 12%.

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