Accuray, Neither Recession Proof Nor Credit Proof (ARAY)

Accuray Inc. (NASDAQ: ARAY) is being punished in after-hours trading.  The company posted earnings at $0.04 EPS on revenues of $52 million.  The problem is that First Call was at $0.09 EPS on $58.2 million. The company also gave 2008 revenue guidance of $210 to $230 million, down from a prior guidance of $250 to $270 million and down from consensus estimates of almost $265 million.  This represents 50% to 64% revenue growth projected over 2007, but it isn’t enough.

Accuray was in a position that you would think is recession-proof and full of growth ahead.  Its own CyberKnife Robotic Radiosurgery System treats tumors anywhere in the body non-invasively with continual image guidance technology and computer controlled robotic mobility.  As it monitors movement real-time, it delivers targeted high-dose radiation to minimize damage to surrounding healthy tissue.  It also eliminates the need for invasive head or body stabilization frames.  Shouldn’t that be recession proof????

You have to see the comments here and determine if you believe the CEO, Euan S. Thomson, Ph.D.:  "Accuray continues to experience record-setting growth…. This sustained growth is a testament to the impact that the CyberKnife System is having on meeting the demands for extracranial radiosurgery, particularly prostate and lung cancer…. While this was a positive quarter with respect to revenue and backlog growth, we believe that broader credit market issues are having a short-term impact on some of our U.S. customers’ purchase and installation timelines, as obtaining financing has become more difficult…."

Shares closed down 1% today at $14.98 and the 52-week trading range was $12.50 to $31.09.  But after-hours is ugly and a new 52-week low down almost 30% to under $11.00. 
You might wonder if Accuray’s salesforce has trouble pitching gold for the price of silver.  Something just doesn’t seem right here.

Jon C. Ogg
January 30, 2008