The Laser King
Looking for a sexy, speculative play that could make you Mad Money? It is Speculation Friday, after all. Last Friday Cramer recommended a laser company called Ionatron that makes lasers for the military. Well, the company landed a deal with the Navy and the stock ran 17% in a week. Not too shabby, skeedaddy.
Cramer wants to stick with the laser theme as a speculative play again this week, although this time he’s going with cosmetic lasers – the sweeter, gentler, but in a way far more ruthless, answer to Ionatron’s laser gun. But remember that Cramer saves these – his juiciest and riskiest picks - for Friday, so you Home Gamers don’t hurt yourself by buying them too quickly without doing the homework first.
It seems like Cramer keeps getting calls about these stocks, whether it’s Syneron , Palomar or Cynosure . Clearly, people want to know about the aesthetic lasers - and for good reason. Plenty of money has been made in these stocks in the past and Cramer, the flip-flopper that he is, keeps changing his mind about which is his favorite.
Is Palomar the laser king because of its patent power? Or is it Syneron with its play on skin rejuvenation? In a fickle industry, Cramer is crowning a new winner today, and it’s Cynosure. It’s his definitive, best-of-breed cosmetic laser play – at least until it gets more expensive and something else comes around that’s even better, he says.
It’s hard to stay consistent because this industry is so dynamic. If CYNO ends up making you as much money as PMTI or ELOS have in the past, Cramer might advise that you jump ship in order to save profits. But for now, Cramer thinks it’s the best.
While Syneron has done next to nothing, Cynosure has doubled. Basically, Cynosure extended a peace offering to its rival, Palomar, which holds a lot of the cosmetic laser patents. Cynosure agreed to make royalty payments on hair-removal lasers to Palomar so that CYNO can do business without having to worry that it will get sued into oblivion.
Cynosure also has the momentum, which is crucial if you want to be the laser king, Cramer says. The company right now has 30% growth and a couple of products that Cramer thinks are likely to be hits. They own an aptly named anti-wrinkling treatment called Affirm, as well as a liposuction treatment called SmartLipo. And if there’s one thing more important to Americans than smooth skin, it’s a slim waist, Cramer says. CYNO’s got both covered.
There’s room to improve here, too. CYNO had gross margins in the low 60% range, compared with 85% for ELOS and 69% for PMTI. These other laser companies had their multiples creep up, Cramer says, because their consensus earnings and growth estimates went lower – always a bad sign, especially when you’re dealing with speculative stocks.
On top of all else, Cynosure is a Rest-of-World play, which you know Cramer loves. The company does about 60% of its business outside America – and unlike America, the rest of the world is a great place to be investing, he says.
Bottom Line: The cosmetic laser space is dicey and fickle, but Cramer thinks Cynosure is a great play right now.
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