Upgrading Accuray on CyberKnife Success

| About: Accuray Incorporated (ARAY)

We recently upgraded Accuray Inc. (NASDAQ:ARAY) to Neutral. The stock was assigned a target price of $7.50 based on a P/S of 1.8x our fiscal 2011 sales estimate of $236 million.

Accuray reported a second quarter fiscal 2010 loss per share of 2 cents, wider than the Zacks Consensus Estimate of a loss per share of 1 cent. However, the company had reported earnings per share of 2 cents in the year-ago quarter.

Total revenues in the second quarter declined roughly 0.5% year over year to $57.3 million. Products revenues declined approximately 13.6% year over year to $35.7 million. Accuray bagged 18 orders for its CyberKnife Robotic Radiosurgery Systems and installed 11 new systems in the second quarter.

Headquartered in Sunnyvale, California, Accuray Incorporated designs, develops, and sells the CyberKnife System, an image-guided robotic radiosurgery system used for the treatment of solid tumors. The CyberKnife System is the first and only commercially available intelligent robotic radiosurgery system designed to treat solid tumors anywhere in the body. This is as an alternative to traditional surgery.

Patients may be treated with the CyberKnife System on an outpatient basis without anesthesia and without the risks and complications inherent in traditional surgery. The CyberKnife procedure is well tolerated.

Patients do not require substantial pre-treatment preparation, and typically there is little to no recovery time or hospital stay associated with the CyberKnife procedure. All these features make the CyberKnife System a preferred choice for physicians.