What happened
STAAR Surgical (NASDAQ: STAA), which specializes in implantable lenses for the eye, saw its shares drop 12% this week, according to data from S&P Global Market Intelligence. The stock is down more than 58% so far this year and has a 52-week high of $163.08 and a low of $54.29, which it reached on Thursday. It closed at $60.67 last Friday.
Image source: Getty Images.
So what
The company issued no news that would cause the drop, but the markets in general had a rough week, with the Dow Jones Industrial Average and the NASDAQ Index each dropping more than 2% over the past five days. Still, STAAR's shares dropped nearly 10% more than the indexes. The stock has received quite a bit of short interest, and its valuation (with a price-to-earnings (P/E) ratio of 117.58) is still high despite the stock's drop.
Investors may be concerned about signs that consumers are tightening their belts on discretionary spending. Align Technology CEO Joe Hogan, in his company's first-quarter release on Wednesday, mentioned his company, which produces Invisalign braces, is seeing "a drop in consumer confidence," and Align's products, like STAAR's implantable collamer lenses (ICLs), are seen as discretionary medical spending.
There are two ways to correct vision problems. The most common are nonsurgical methods, such as glasses or contacts, but there are also surgical methods, such as LASIK or STAAR's ICLs, both of which are types of refractive surgery. Glasses are relatively inexpensive compared to surgical methods, and ICL surgery can run as much as $4,000 to $5,000 or more per eye, and LASIK can cost $2,200 per eye.
Now what
In the short term, there are reasons to be concerned about STAAR stock, though stocks that hit their 52-week lows often get an immediate bounce-back the following day from bargain hunters. If consumers are truly pulling back, that will hurt the company's business. However, in the long term, there are plenty of opportunities for growth. According to company research, half of the world's population is expected to have myopia (nearsightedness) by 2050, and ICL surgery is a long-term solution for myopia.
On top of that, STAAR is coming off a positive fourth-quarter report. The company said it had record 2021 revenue of $230.5 million, up 41% over 2020, increased gross margin from 72.4% in 2020 to 77.5% in 2021, and full-year earnings per share (EPS) of $0.50 compared to $0.12 the prior year. Its Q4 numbers showed that trend was continuing with revenue of $59 million, up 28% year over year and EPS of $0.10, up from $0.07 in EPS in the same period in 2020.
The healthcare company said it expects to report its Q1 numbers after the markets close on May 4.
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Jim Halley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Align Technology. The Motley Fool recommends STAAR Surgical. 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.
