Clear Vistas At Advanced Medical Optics

By Gene G. Marcial Advanced Medical Optics (AVO) isn't a household name, but it's a global leader in products for ophthalmic surgery and eye care. Spun off by Allergan (AGN) in 2002, the company makes devices for cataract and refractive surgery, including intraocular lenses. Its stock hit a 52-week high of 43 in late June, up from 17 in November. But it has since slipped to 38.

Is it downhill from here? By no means, says Joanne Wuensch of investment firm Harris Nesbitt, who rates the stock "outperform" and sees it at 46 in a year. After a strong run, she says, "it is pausing before a further ascent." The pause, Wuensch adds, is due in part to the purchase in June of Pfizer's (PFE) ophthalmic business. The deal makes sense for Advanced, she says. It will boost its product line and fatten profit margins. Mike Lachman of ThinkEquity Partners rates the stock "overweight" and figures added sales from the acquired unit in 2005 will be $145 million, assuming no growth. Wuensch sees pro-forma profits of $1.23 in 2004 on sales of $734 million, $1.70 on $851 million in 2005, and $2 on $905 million in 2006.

Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.

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