On Tuesday, Truist Securities adjusted its outlook on shares of Nevro Corp (NYSE:NVRO), a medical device company, by reducing its price target to $10 from $11, while keeping a Hold rating on the stock. The firm's decision reflects a valuation based on anticipated revenues and market comparisons.
The new price target is derived from applying approximately a 0.6x enterprise value-to-sales (EV/Sales) multiple to Nevro's projected 2025 revenues. This valuation brings Nevro's multiple in line with other small to mid-sized (SMID) MedTech companies that are undergoing turnarounds and are currently trading at multiples ranging from 0.5x to 1x.
According to the firm, the adjusted multiple is consistent with Nevro's current trading on the firm's estimated 2024 revenues. The rationale behind the Hold rating and adjusted price target centers on the challenges faced by the company in a slow-growing core spinal cord stimulation (SCS) market, coupled with an increased dependence on acquisitions to meet its growth acceleration targets.
Nevro's strategy in the face of a sluggish SCS market involves acquisitions that aim to catalyze growth. Truist Securities believes that the application of a turnaround multiple is justified for Nevro, taking into account these strategic moves and the current market dynamics.
This latest price target adjustment by Truist Securities offers investors a revised expectation for Nevro's stock performance based on the company's financial outlook and strategic initiatives within the medical technology sector.
In other recent news, Nevro Corp's financial performance has been the subject of several analyst adjustments following their first-quarter results. Nevro Corp reported an 8% organic growth and a significant 73% year-over-year increase in positive free cash flow.
Still, its operating leverage did not match the revenue growth, attributed to integration costs from mergers and acquisitions. Despite these challenges, Nevro Corp has raised its full-year 2024 outlook, expecting gross revenue to be between $937 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. Baird, BofA Securities, Canaccord Genuity, Piper Sandler, and Jefferies have all revised their stock price targets for the company. These recent developments highlight Nevro Corp's financial dynamics and the different perspectives of financial analysts.
InvestingPro Insights
As Nevro Corp (NYSE:NVRO) navigates the challenges of the spinal cord stimulation market and refines its growth strategy, the latest data from InvestingPro provides a snapshot of the company's financial health and market performance.
With a market capitalization of $350.39 million and a negative P/E ratio of -4.19, reflecting its current unprofitability, Nevro's financial position is a critical factor for investors to consider. Despite this, the company's cash position is strong, as it holds more cash than debt on its balance sheet, which is a positive sign for its financial stability.
InvestingPro Tips highlight the company's significant return over the last week, with a 25.36% price total return, hinting at recent investor optimism. Moreover, Nevro's liquid assets exceed its short-term obligations, suggesting a degree of financial flexibility in the near term.
On the flip side, analysts have revised their earnings downwards for the upcoming period, and there is a consensus that the company will not be profitable this year. These mixed signals reflect the complex environment in which Nevro operates.
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