On Monday, Wells Fargo initiated coverage on Nevro Corp (NYSE:NVRO) stock, a medical device company, assigning an Equal Weight rating and setting a price target of $14.00. The coverage comes amid considerations that include a cautious outlook on the spinal cord stimulation (SCS) market and potential challenges that could affect the company's growth trajectory.
The Wells Fargo analyst cited several factors influencing the decision, including a less optimistic view of a robust recovery in the core SCS market. Additionally, the company could face competitive and reimbursement obstacles that may hinder Nevro's growth prospects.
Another point of concern for Wells Fargo is the uncertainty surrounding Nevro's sales growth and the potential benefits of operating leverage from the launch of its HFX iQ system and recent changes to its sales force structure. These factors contribute to the uncertainty in forecasting the company's financial performance.
Furthermore, the analyst noted that Nevro does not have a clear path to profitability at this time. This assessment is based on an analysis of the company's financial outlook and operational strategies.
Finally, Wells Fargo highlighted that Nevro's guidance for 2024 assumes approximately flat year-over-year gross margin. This is attributed to expected higher inventory costs and a legacy device mix that may impact the company's financials. The Equal Weight rating reflects a neutral stance on the stock, suggesting that the firm anticipates Nevro's market performance to align with the broader market or sector averages.
InvestingPro Insights
In light of Wells Fargo's initiation of coverage on Nevro Corp, current data from InvestingPro provides additional context to their analysis. With Nevro's market capitalization standing at $483.73 million and a notable gross profit margin of 68.22% for the last twelve months as of Q4 2023, the company shows a strong ability to generate profit relative to its revenue. Despite this, the company has not been profitable over the same period, with an adjusted operating income of negative $99.31 million and a concerning return on assets of -14.9%.
InvestingPro Tips highlight that Nevro holds more cash than debt on its balance sheet, which could provide some financial flexibility, and liquid assets exceed short-term obligations, suggesting a degree of short-term financial health. Yet, analysts have revised their earnings downwards for the upcoming period, and they do not anticipate the company will be profitable this year. Moreover, Nevro does not pay a dividend to shareholders, which can be a consideration for income-focused investors.
For readers seeking a deeper dive into Nevro's financial health and future prospects, InvestingPro offers additional tips that could shed light on the company's valuation and market position. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and explore the full range of insights, which includes numerous additional InvestingPro Tips.
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