Medical aesthetics company Evolus (EOLS) has experienced dramatic volatility recently, but the reason why remains a mystery.
“We have received many questions on today’s large move in Evolus shares, up >50% earlier and now +~20% on very heavy volumes” wrote Mizuho Securities’ Vamil Divan on May 22.
“We do not have any specific insights or explanations, but provide here our thoughts on some possible drivers investors have been asking us about” he added. The stock closed Friday’s trading up 10%, and continued with a 5% gain after-hours.
One possible option is short covering ahead of an ITC decision, although Divan writes that this ‘seems excessive’ given that a preliminary decision from the ITC is expected by June 5, with a final decision due in October.
“One of the main overhangs on EOLS shares this year has been the ongoing US International Trade Commission hearing between Medytox and Daewoong and implications that the decision may have on Evolus’ ability to commercialize Jeuveau in the US” Divan explains.
But, he adds, “it is not clear to us why such a large move would suddenly occur today, as opposed to earlier this week or between now and early June.”
He also sees a Korean ruling on Medytox as having little material impact on Evolus or sales of Evolus’ Jeuveau in the US, where the vast majority of Evolus’ value is coming from.
And while the most important factor for Evolus is a reopening of physician practices where customers can start receiving facial toxin treatments again there was no significant shift on Friday that would necessarily change investor sentiment in such a meaningful way.
“Fundamentally, our views on the stock have not changed” says Divan, as he maintained his buy rating and $8 price target on Evolus stock (79% upside potential).
He sees Evolus as having a potentially unique place in the attractive aesthetics market, but assumes it will take time for the market to return to anything close to normal following the Covid-19 pandemic and resulting economic fallout.
Jeuveau will still be the newest toxin on the market when the market starts to recover, says Divan, and Evolus can further leverage their digital platform and help improve product affordability for patients and improve profitability for providers.
Despite the recent rally, shares have still plunged 63% year-to-date, and the overall analyst consensus remains a cautiously optimistic Moderate Buy. The average analyst price target stands at $8. (See Evolus stock analysis on TipRanks).
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