.Source: Investing Published 07/08/2024, 10:23
JP Morgan on Wednesday downgraded shares of Nevro Corp. (NYSE: NVRO), moving its rating to underweight from neutral. The downgrade comes as the company sees ongoing challenges facing the medical device company. Including competition and a recent cut in its 2024 guidance.
Nevro’s Efforts and Market Challenges
Nevro, known for its pain management technology, is trying to expand its growth and diversify its product offering with new initiatives, such as treatments for peripheral diabetic neuropathy (PDN) and the acquisition of Vyrsa, which focuses on sacroiliac (SI) joint problems. Despite these efforts, JPMorgan notes that the company’s growth is still lagging expectations.
The JPMorgan analyst noted that Nevro faces significant competition from larger players in the spinal cord stimulation (SCS) market, which has weighed on its performance. This competitive landscape is cited as a factor in the company’s downgrade of its 2024 guidance.
Furthermore, uncertainty surrounding Nevro’s future growth trajectory and cash flow generation ability contributed to the analyst’s decision to withdraw the price target on the stock. The lack of clarity on how Nevro will overcome. Its structural issues and improve its growth prospects has raised concerns about its valuation.
This change in rating reflects JPMorgan’s cautious stance on Nevro stock, advising investors of the challenges the company may face in meeting its financial and growth targets.
In other recent news, Baird lowered its price target on the stock due to concerns about the company’s near-term growth prospects and market share recovery.
Similarly, BofA Securities, Canaccord Genuity, Piper Sandler, and Jefferies have also revised their price targets. Despite these adjustments, Nevro Corp. posted 8% organic growth and a significant 73% year-over-year increase in positive free cash flow. However, the company’s operating leverage did not match this revenue growth due to integration costs from M&A.
Nevro Corp. raised its full-year 2024 outlook, expecting total revenue to be between $937 million 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 came in at $101.9 million, beating Canaccord Genuity’s $97.2 million forecast and the Street’s $97.9 million forecast. These latest developments shed light on Nevro Corp.’s financial dynamics and the differing views of financial analysts.
InvestingPro Insights
Following JPMorgan’s downgrade of Nevro Corp., InvestingPro’s real-time data analysis provides additional context on the challenges facing the company. Nevro’s market cap is around $319.17 million, reflecting investor sentiment and the market’s assessment of the company’s prospects. The company’s price-to-earnings (P/E) ratio is currently negative at -3.81, indicating that it is not generating profits relative to its stock price. This is in line with concerns raised about Nevro’s profitability and competitive position in the market.
InvestingPro’s advice reveals that Nevro is rapidly depleting its cash reserves, which could be a concern for investors looking for long-term sustainability. Although the company has more cash than debt, the company’s ability to effectively manage its cash flows remains in question. Furthermore, analysts have revised earnings downward for the upcoming period, indicating that the financial community remains skeptical about Nevro’s ability to meet its growth and profitability targets. For those looking for more detailed analysis, InvestingPro offers additional advice on Nevro’s financial health and market outlook. It’s also worth noting that the company’s stock has suffered significantly. With a six-month total price return of -49.45% and a year-to-date return of -59.62%. Confirming the market’s reaction to its performance and outlook. These metrics, along with InvestingPro’s advice, provide investors with a clearer picture of the risks and considerations. When evaluating Nevero stock in their portfolios.
