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Why ViewRay Stock Is Up Big Today

By Brian Feroldi - Updated Oct 15, 2019 at 1:43PM

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Shares rally after management gives investors a sneak peek at its third-quarter results.

What happened

In response to the company's announcement of preliminary results for the third quarter of 2019, shares of ViewRay (VRAY 7.82%), a medical equipment provider that has been beaten down recently, were up as much as 29% in early morning trading on Tuesday. The stock was up about 8% as of 1:08 p.m. EDT. 

So what

Here are the numbers that were released today:

  • Third-quarter revenue is expected to be $20.9 million. While that represents a sequential decline, it is nicely above the $15.8 million that Wall Street was expecting.
  • Eight new orders for the MRIdian Linac system were received during the quarter, including three upgrades. That represents $35 million in the future sales, which is about flat with the year-ago period.
  • ViewRay's backlog grew by about $12 million sequentially to $231 million.
  • Cash balance was $92 million at quarter-end.
  • Management reaffirmed its full-year 2019 revenue guidance of $80 million to $95 million. Cash usage is still expected to be in the range of $80 million to $90 million.
MRI technician looking at three computer monitors

Image source: Getty Images.

CEO Scott Drake stated:

I am pleased with the progress our team is making on the commercial, clinical, and innovation fronts. With our customers, we are driving a paradigm shift in how radiation therapy is delivered and treating patients that, without MRIdian, had no other treatment options. Customers ranging from large academic centers to free-standing clinics are responding to our value proposition.

The company plans to share more details with investors on its conference call on Nov. 12.

Traders cheered the better-than-expected results.

Now what

It's good to see that ViewRay's stock is bouncing back, but this company is still in a tough position. Its market cap is just $273 million at the moment, and its cash balance is still dwindling. It won't be long before it will need to tap investors for a fresh capital infusion, but doing so at today's prices would be highly dilutive to current shareholders.

If ViewRay can produce a string of upbeat quarterly results, then it may be able to persuade Wall Street that it is a promising growth stock once again. But there's no doubt that this company is very risky, so I'll continue to monitor its progress from the safety of the sidelines.

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