Morgan Stanley Goes Over Accuray's Pros And Cons

In a report rolled out Wednesday, Morgan Stanley reiterated an Equal-weight rating on Accuray Incorporated (NASDAQ: ARAY) and raised its price target to $11. According to analyst Steve Beuchaw, the company “remains comfortable with the orders outlook and the multiple remains depressed.” Therefore, he continues to see upside potential for the company going into fiscal 2016.

While the firm maintains “a positive fundamental bias for ARAY shares over the medium term,” its analysts believe “upside to order forecasts and EPS estimates is required to drive upside.”

According to the report, Accuray and TomoTherapy “occupy important and expanding niches as specialty radiation therapy systems.” Moreover, Tomo and CyberKnife are currently the most advanced systems “available for tumor motion tracking and advanced radiation dose distribution.”

In addition, the firm points out a few potential catalysts. Namely, a successful CyberKnife MLC launch, some system upgrades and potential competitive launches, including ASTRO in the second half of 2015.

Morgan Stanley analysts see austerity and reimbursement as two major challenges for the oncology market. Moreover, “efforts by CMS and private payors to control costs” could have a detrimental effect on the stock price.