By Freezing Off Flab, CoolSculpting Is Heating Up

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Fat man in very tight jeans
If January is about making New Year's resolutions, February has to be about breaking them -- or cutting corners to make things happen. Along comes Zeltiq Aesthetics (ZLTQ) -- one of the market's hottest stocks after soaring eightfold over the past two years -- ready to help dieters shake off some of the flab in their flanks.

Zeltiq isn't a household name, but its CoolSculpting machine is gaining traction with cosmetic surgeons, dermatologists and weight-loss-center physicians. CoolSculpting is a noninvasive procedure that uses extreme cold to freeze off stubborn fat cells. The FDA-cleared procedure isn't perfect, but the cool process is in hot demand. A whopping 1.5 million CoolSculpting procedures have been performed through the growing installed base of more than 2,800 systems.

We'll get a better snapshot on how Zeltiq fared in its latest quarter when it reports later this month, but for now we can explore the redemptive tale of how one of the biggest losers of 2012 turned into one of the biggest winners in 2013 and 2014.

Losing Weight and Gaining it Back

Zeltiq went public at $13 in late 2011, a year after CoolSculpting was approved by the FDA for the treatment of love handles. Investors didn't buy into the stock right away. There were just 600 machines in operation, and consumers were skeptical about the effectiveness of the procedure. CoolSculpting with its proprietary Cryolipolysis technology eliminates fat through advanced cooling, but it takes several weeks after the treatment for noticeable results to materialize. Despite the many benefits of the procedure -- it's an anesthesia-free process that can be tackled during a lunch break -- it didn't catch on. Revenue climbed just 12 percent in 2012, and the stock shed more than two-thirds of its value.

Then came 2013, when it all started coming together. Zeltiq was initially targeting just 10 percent in revenue growth for the entire year, but a few months later it was bumping that figure to 20 percent. A few months after that, it doubled its guidance to 40 percent. Revenue eventually clocked in with a 47 percent spurt, and Zeltiq's top line grew even faster through 2014.

Everything started coming together. The FDA went on to approve CoolSculpting for the treatment on abdomens and eventually thighs. Just last month the machine was approved to cool at lower temperatures that lead to shorter treatment times. In other words, as good as growth has been at Zeltiq, it will probably get better now that the average system can perform more procedures in any given day.

Weight for It

Shares of Zeltiq have closed higher in seven consecutive months. That would be a notable achievement even if the market weren't as rocky as it has been lately.

CoolSculpting isn't a magical cure for flab. Some reviewers have complained about the process not being as immediate or effective as liposuction or other invasive procedures. There are also some potential side effects. However, for a company that finally turned the corner of profitability last year, momentum is clearly in Zeltiq's corner.

After raising its top-line guidance several times through 2014, Zeltiq's report later this month should serve as a strong close to the year. New procedures and products should produce robust guidance for 2015. Just make sure to keep CoolSculpting machines away from the actual report. The last thing that investors would want is to see its financials cool off.

Motley Fool contributor Rick Munarriz owns shares of Zeltiq Aesthetics. The Motley Fool recommends Zeltiq Aesthetics. Try any of our Foolish newsletter services free for 30 days. To read about our favorite high-yielding dividend stocks for any investor, check out our free report.
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