On Thursday, Citi upgraded shares of Nevro Corp (NYSE:NVRO), a medical device company, from Sell to Neutral, while also reducing the price target to $6.89 from a previous target. This adjustment came after the company's second quarter earnings report, which included a significant cut to its full-year revenue guidance.
Nevro's revised revenue forecast is now set between $400 million and $405 million, down from the initial $435 million to $445 million range. This revision prompted a 44% decline in the company's shares following the announcement. Year-to-date, Nevro's stock has seen a decrease of 73%, currently trading at less than 0.5 times next twelve months (NTM) revenue.
Citi's analysis suggests that with the stock's significant drop and the lowered revenue expectations, the market has little optimism about Nevro's near-term prospects. The firm also noted that Nevro is actively exploring strategic alternatives, which could include a sale or merger, although the base case does not assume such an event will occur.
The analyst expressed a cautious stance, acknowledging that while the financial projections for 2024 seem reasonable, the overall uncertainty in the market is high. Key factors that will require further clarity include the underlying growth of the U.S. Spinal Cord Stimulation (SCS) market, the competitive landscape, and the adoption of Nevro's Vyrsa system. These elements will be critical in assessing the company's future performance and potential for a more positive outlook.
In other recent news, Nevro Corp. experienced a downturn 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 also reported a net loss from operations of $25.1 million, while maintaining a positive adjusted EBITDA of $3 million. Despite these financial results, Nevro Corp. is actively exploring strategic options such as partnerships, mergers, or a sale.
Wolfe Research recently upgraded Nevro Corp. from Underperform to Peerperform, citing an anticipated 3% total company growth annually starting in 2025, albeit below consensus estimates from other analysts. However, the firm also highlighted several challenges facing Nevro Corp., including a competitive market and the distant prospect of standalone profitability.
In response to these developments, Nevro Corp. revised its full-year revenue guidance to $400 million to $405 million and is focusing on strategies to diversify and leverage its product portfolio. The company also holds over $270 million in cash and investments. Additionally, Nevro Corp. anticipates potential growth with the release of new products and the completion of the second RCT study for PDN next year.
InvestingPro Insights
As Nevro Corp (NYSE:NVRO) faces a challenging period, recent data from InvestingPro offers a deeper dive into the company's financial health and stock performance. The market capitalization of Nevro stands at approximately $209.9 million, reflecting the impact of recent events on the company's valuation. Despite a slight revenue growth of 1.59% in the last twelve months as of Q2 2024, the company's quarterly revenue saw a decline of 4.27%, highlighting the volatility in its financial performance.
InvestingPro Tips indicate that the stock is currently in oversold territory, which might attract investors looking for potential bargains. However, analysts are not optimistic about profitability this year, and the stock has experienced significant declines over various time frames, including a 47.39% drop in the last week and a 76.15% fall over the past year. On a positive note, Nevro's liquid assets surpass its short-term obligations, suggesting some financial stability in the face of immediate liabilities. For investors seeking more in-depth analysis, there are additional InvestingPro Tips available at https://www.investing.com/pro/NVRO, providing a comprehensive view of Nevro's financial standing and market potential.
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