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Small-Cap Establishment Labs (ESTA) Draws Bullish Flow into Support

by | Oct 7, 2021

Establishment Labs (ESTA) a favorite small-cap name back at key support along the 200-MA and saw buyers on 10/5 in the November $65 and $70 calls in unusual action. ESTA has been on a strong run since October 2020 and flagging on the weekly under $75 with room above to a measured move to new highs around $105. The $1.7B company trades 15X sales and 22X cash. ESTA designs, develops, and markets advanced silicone-filled breast and body shaping implants. Breast augmentation remains the most requested aesthetic surgery in the world with 1.5M procedures annually yet the company notes this is an area in med-tech that has not seen many innovations since the mid-1990s. ESTA’s Motiva technology utilizes a silicone gel with natural tactile feel and movement as well as safety. The ‘SmoothSilk’ surface has a very low rate of capsular contracture and less biofilm formation due to much lower surface area overall. ESTA posted positive study results in June for their SmoothSilk implants. The study looked at potential foreign body response versus macrotextured implants and found that the company’s SmoothSilk products the least inflammatory response. ESTA sees a number of drivers for growth including entering new markets, expanding their direct sales model, and launching new products. ESTA also with a positive development earlier in 2021 after Allergan decided to exit a number of global breast implant markets. The move gives ESTA a nice opportunity to grow in Europe and Asia. They see China as a big opportunity and could see their TAM triple with approvals in both China and the US in 2022. Analysts have an average target for shares of $84.50 with a Street High $90. BTIG with an $88 PT and raising estimates in June. The firm expects Establishment Labs to keep winning share in many key geographies due to tailwinds from the safety data, digital engagement, pipeline products, and competitive exits and anticipates new products like the Ergonomix2 breast implant platform can increase adoption and take price. Cowen positive in February. They like the Motiva MIA surgery, a promising minimally invasive platform that triples its addressable market. Short interest is 3%. Hedge fund ownership fell 1.5%. Nantahala Capital a top owner with 1.9M shares.