Baird has adjusted its outlook on Nevro Corp (NYSE: NVRO), reducing the price target to $5.00 from the previous $8.00 while keeping a Neutral rating on the stock.
The firm's analyst cited the company's revised guidance as a more realistic benchmark for NVRO's performance, anticipating that management will likely confirm the FY24 guidance.
This expectation is based on historical patterns showing a sequential increase in the fourth quarter.
Nevro's stock is currently trading at what is considered trough valuations, at 0.3 times the estimated 2024 enterprise value to sales ratio. This valuation reflects investor concerns about the company's growth prospects and profitability.
These concerns were heightened after Nevro reported a 3% revenue shortfall in the second quarter and subsequently lowered its full-year revenue and adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) forecasts. Despite the adjusted EBITDA for Q2 exceeding expectations, the updated guidance has not been enough to elevate the stock's performance.
The analyst also noted that while the company's guidance is now in line with expectations, it may still be challenging to stimulate stock growth. This is partly due to the fact that Nevro has indicated the possibility of exploring strategic alternatives, which could involve changes in the company's operations or ownership.
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, maintaining a positive adjusted EBITDA of $3 million. Amid these developments, Nevro Corp revised its full-year revenue guidance to $400 million to $405 million.
In response to the financial results, Citi upgraded Nevro Corp from Sell to Neutral, while Wolfe Research raised its rating from Underperform to Peerperform. Wolfe Research anticipates approximately 3% total company growth annually starting in 2025, albeit below consensus estimates from other analysts.
Despite the financial challenges, Nevro Corp is actively exploring strategic options such as partnerships, mergers, or a sale. The company holds over $270 million in cash and investments and anticipates potential growth with the release of new products and the completion of the second RCT study for PDN next year.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Nevro Corp's financial situation, aligning with Baird's cautious outlook. The company's market capitalization stands at $183.43 million, reflecting the significant challenges it faces. Nevro's price-to-book ratio of 0.67 as of Q2 2024 indicates that the stock is trading below its book value, potentially supporting Baird's assessment of "trough valuations."
InvestingPro Tips highlight that Nevro is "quickly burning through cash" and "not profitable over the last twelve months," which explains the analyst's concerns about the company's financial health. The stock's performance has been notably weak, with InvestingPro data showing a 70.9% price decline over the past year and a 77.14% drop year-to-date. These figures underscore the market's skepticism about Nevro's prospects, as reflected in Baird's lowered price target.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Nevro Corp, providing a deeper understanding of the company's financial position and market performance.
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