On Monday, Morgan Stanley (NYSE:MS) adjusted its stance on Nevro Corp (NYSE:NYSE:NVRO), downgrading the stock from Equalweight to Underweight. The firm also slashed its price target for the medical device company's shares to $4.00, a significant decrease from the previous $9.00 target. The downgrade comes amid a challenging year for Nevro, with the stock down over 78% year-to-date and trading near its 52-week low of $3.95.
The downgrade follows a series of challenges faced by Nevro throughout the year, particularly within its Spinal Cord Stimulation (SCS) business. Analysts at Morgan Stanley noted limited evidence of growth for Nevro's newer product, Vyrsa, although they acknowledged that it has been a formative year for the product.
According to InvestingPro data, the company's financial health is rated as 'FAIR,' though it remains unprofitable with negative EBITDA of $73.18 million.
The decision to downgrade was influenced by several factors. Firstly, the SCS market is expected to remain difficult, with increasing interest in products offered by Nevro's competitors. Secondly, there is skepticism regarding the company's ability to significantly reduce costs without adversely affecting its revenue growth.
Lastly, analysts see no clear strategic options that could potentially benefit the company. InvestingPro subscribers can access 8 additional key insights about Nevro's financial health and market position in the comprehensive Pro Research Report.
Morgan Stanley elaborated on these points, suggesting that there are more attractive investment opportunities within their coverage universe, despite Nevro's shares trading around all-time lows.
Based on InvestingPro's Fair Value analysis, the stock appears to be undervalued at current levels, though this new price target reflects a more cautious outlook for the company's financial performance going forward.
In other recent news, Nevro Corp has reported noteworthy developments in its financial performance and strategic direction. The company's third-quarter results revealed a decrease in worldwide revenue by 6.7% to $96.9 million, yet the adjusted EBITDA loss was notably better than anticipated, reporting a loss of $1.8 million due to effective cost-cutting measures. Nevro has maintained its revenue guidance for the full year 2024, despite these changes.
Several analyst firms have adjusted their outlook on Nevro. Piper Sandler reduced the price target for Nevro's shares to $6, while retaining an underweight rating, expressing concerns about the company's growth prospects. Baird has increased Nevro's price target to $6, maintaining a neutral rating due to potential margin improvements in 2025.
Canaccord Genuity reduced Nevro's price target to $7 from $8, maintaining a hold rating, following the company's Q3 earnings report and ongoing market challenges.
Nevro is focusing on artificial intelligence innovations, having received FDA approval for its HFX iQ with HFX AdaptivAI technology. The company has also recognized the need for increased direct-to-consumer spending, following a 15.2% drop in US trial procedures during Q3.
Nevro continues to target expansion in the underpenetrated painful diabetic neuropathy (PDN) market, leveraging promising clinical study results. These are some of the recent developments with Nevro Corp.
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