Wolfe Research raises Nevro Corp to Peerperform from Underperform

On Thursday, Wolfe Research adjusted its stance on Nevro Corp (NYSE:NVRO), a medical device company, upgrading the stock from Underperform to Peerperform. The firm noted that its models predict approximately 3% total company growth annually starting in 2025, which is below the consensus estimates from other analysts. This growth rate is consistent with the average annual real growth rate for all indications of the business from 2018 to the estimated 2024.

The analyst from Wolfe Research expressed difficulty in justifying a higher valuation for Nevro Corp, citing challenges in forecasting the company's path to real profitability. The competitive nature of the market, with three large players dominating and new entrants emerging, contributes to the complexity of the situation. Additionally, the analyst pointed out that achieving profitability for Nevro on a standalone basis appears very distant when looking at the financial models.

Despite the upgrade, the analyst's commentary highlighted several headwinds facing Nevro Corp. The medical device market, specifically in the pain management category, is described as sluggish in terms of growth. The presence of diversified competitors and the entry of new companies into the market add to the competitive pressures.

Nevro Corp's new leadership is faced with the challenging task of steering the company toward profitability. The analyst's remarks suggest that while the company's growth expectations are in line with historical rates, the path to profitability is not clear-cut and is fraught with market challenges.

In summary, Wolfe Research has changed its rating on Nevro Corp, reflecting a neutral outlook on the stock's performance relative to its peers. The firm's analysis indicates a cautious approach to Nevro's future financial health and market position.

In other recent news, Nevro Corp. reported a decrease in its second quarter 2024 financial results, with worldwide revenue falling 4.3% to $104.2 million and U.S. revenue decreasing by 2.4% to $90.7 million. The company experienced a net loss from operations of $25.1 million, with a positive adjusted EBITDA of $3 million.

Despite these challenges, Nevro is exploring strategic options such as partnerships, mergers, or a sale. The company revised its full-year revenue guidance to $400 million to $405 million and holds over $270 million in cash and investments.

Nevro is focusing on strategies to diversify and leverage its product portfolio, aiming to reach EBITDA profitability with a target range in the mid-$400 millions. International markets have shown strong growth, and Nevro is optimistic about long-term growth potential in the PDN market. The company anticipates potential growth with the release of new products and the completion of the second RCT study for PDN next year.

InvestingPro Insights

In light of Wolfe Research's recent analysis of Nevro Corp (NYSE:NVRO), a closer look at real-time data from InvestingPro can provide additional context for investors. The company's market capitalization stands at a modest $180.08 million, reflecting the challenges it faces in the competitive medical device sector. Additionally, Nevro's price-to-book ratio, as of the last twelve months leading up to Q2 2024, is at 0.66, which may indicate that the stock is potentially undervalued relative to its assets.

Two InvestingPro Tips that stand out for Nevro Corp include the observation that the stock is currently in oversold territory according to the Relative Strength Index (RSI), and the fact that analysts do not anticipate the company will be profitable this year. These insights are particularly relevant given the company's current market dynamics and Wolfe Research's cautious stance on Nevro's path to profitability.

For investors seeking a more comprehensive analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/NVRO. These tips delve deeper into the company's financial health and market position, offering valuable information that can aid in making informed investment decisions.

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