On Tuesday, Baird updated its outlook on Nevro Corp (NYSE:NVRO), a global medical device company, by reducing its price target to $11 from $12, while maintaining a Neutral rating. The adjustment reflects caution regarding the company's short-term growth prospects and market share recovery.
The firm's analyst cited several challenges facing Nevro, including the recovery of the broader Spinal Cord Stimulation (SCS) market and the company's ability to regain its market share. These factors have contributed to Nevro's valuation remaining at the lower end of the MedTech industry, trading at approximately 0.7 times its estimated 2024 Enterprise Value to Sales ratio.
Nevro's management has set what is perceived as an attainable goal for second-quarter growth, despite it being below the Central Nervous System (CNS) segment. However, the analyst expressed skepticism about the likelihood of the company increasing its revenue guidance for the full year 2024.
Investor concerns also extend to Nevro's long-term profitability, given the current market dynamics.
While a guidance that surpasses negative expectations could provide a temporary boost to Nevro's stock, the firm's stance will remain unchanged until there is more confidence in the company's market recovery, ability to recapture market share, the impact of Peripheral Diabetic Neuropathy (PDN) on revenue, and whether recent acquisitions can stimulate growth and improve margins.
In other recent news, Nevro Corp has been the subject of several analyst adjustments following their first-quarter results. BofA Securities, Canaccord Genuity, Piper Sandler, and Jefferies have all revised their stock price targets for the company, with a focus on Nevro's mixed financial performance.
Nevro Corp reported an 8% organic growth and a significant 73% year-over-year increase in positive free cash flow. However, its operating leverage did not match the revenue growth, attributed to integration costs from mergers and acquisitions.
Despite these challenges, Nevro Corp has raised its full-year 2024 outlook, expecting gross revenue to be between $937 and $942 million. The company's adjusted earnings per share (EPS) are also expected to improve, with the new forecast set at $5.05 to $5.11. Nevro Corp's first quarter revenue reached $101.9 million, outpacing both Canaccord Genuity's projection of $97.2 million and the Street's $97.9 million forecast.
The company's financial performance has led to various reactions from analysts, with BofA Securities, Canaccord Genuity, and Piper Sandler maintaining their ratings on the stock, while Jefferies continues to hold an Underperform rating. These recent developments highlight Nevro Corp's financial dynamics and the different perspectives of financial analysts.
InvestingPro Insights
Baird's recent reevaluation of Nevro Corp aligns with some of the mixed signals observed in the company's financial metrics and analyst sentiments. According to real-time data from InvestingPro, Nevro holds a market capitalization of $350.39 million, reflecting its standing in the medical device sector. The company's P/E ratio is currently at -4.19, indicating that investors are expecting future growth to counterbalance recent losses. This is further emphasized by a significant 25.36% return over the last week, suggesting a possible rebound or positive investor sentiment in the short term.
However, Nevro's challenges are not to be overlooked. The company is not expected to be profitable this year, as evidenced by the negative operating income margin of -22.14% over the last twelve months as of Q1 2024. Additionally, despite holding more cash than debt, Nevro is quickly burning through cash, which could impact its financial stability and future growth prospects. With three analysts having revised their earnings downwards for the upcoming period, there is a cautious outlook on Nevro's performance.
For investors seeking more comprehensive analysis, there are additional InvestingPro Tips that delve into Nevro's financial health and market potential. For instance, while the company's liquid assets exceed short-term obligations, indicating some degree of financial flexibility, its stock has taken a big hit over the last six months with a -47.87% return. Moreover, Nevro does not pay a dividend, which may be a consideration for income-focused investors. With these insights, investors can better gauge whether the current stock performance aligns with their investment strategy. To explore more detailed insights, visit https://www.investing.com/pro/NVRO and consider using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, which includes a total of 9 additional InvestingPro Tips to aid in making informed decisions.
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