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Here's Why You Should Hold on to Nevro (NVRO) Stock Now

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Zacks Equity Research
·4 min read
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Nevro Corp NVRO is well-poised for growth on a strong international presence, solid prospects in the Spinal Cord Stimulation (SCS) market and its focus on innovation. However, intense competition isa concern.

Shares of Nevro have gained 17.9% compared with the industry’s growth of 4.9% over the past three months.

Nevro, with a market capitalization of $5.59 billion, is a medical device company engaged in developing and commercializing a neuro modulation platform for the treatment of chronic pain, primarily in the leg. It anticipates an earnings improvement of 24.4% in the first quarter of 2021.  Moreover, it has a trailing four-quarter earnings surprise of 32.7%, on average.

Let’s take a closer look at the factors that substantiate the company’s Zacks Rank #3 (Hold).

Solid International Prospects: Nevro continues to benefit from its sturdy international foothold. In the third quarter, international revenues were $17.5 million, up 10% year over year on a reported basis and 5% in constant currency. A successful Omnia unveiling, higher patient and customer activity, and a rebound in customer inventory levels (on a sequential basis) contributed to this upside. In the same period, the company saw virtual 100% utilization of Omnia in Australia and across the European markets.

Lucrative SCS Market: Robust prospects in the SCS market have been favoring the company for quite some time now. Aging demographics, high costs related to therapy, strict regulatory approvals and excessive reliance on the traditional SCS therapy are the primary factors driving the market.

Within the SCS market, the company continued to progress through the third quarter, courtesy of the Omnia launch. Even through the pandemic, physician enthusiasm around Omnia and its unique platform capable of offering HF10 and lower frequencies drove more adoption among the company’s customers than anticipated.

Senza, A Key Catalyst: Nevro’s flagship platform Senza continues to be a key catalyst. In recent times, Nevro launched its product platform Senza Omnia in the United States, which is expected to provide it with a competitive edge.

In May 2020, the company announced the receipt of a CE mark approval for the Senza Omnia SCS system. This next-generation SCS system was created and developed in close consultation with customers to offer a comprehensive solution forchronic pain. This approval is likely to aid Nevro in strengthening its international presence further. During the second quarter, the company launched Omnia in Europe as well as Australia, and ever since, the product has made a marked progress in those markets. Currently, Omnia represents 70-75% of the company’s utilization in the U.S. market.

What’s Ailing the Stock?

Competition is intense in the SCS market. Per management, the primary competitive factors include company brand recognition, clinical research leadership, pricing and reimbursement.

How Are Estimates Faring?

For 2020, the Zacks Consensus Estimate for revenues is pegged at $365.8 million, indicating a decline of 6.3% from the year-ago reported figure. The same for adjusted loss per share stands at $2.61.

Key Picks

Some better-ranked stocks from the broader medical space include Align Technology ALGN, Cardinal Health CAH and Thermo Fisher Scientific TMO, each presently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Align Technology has a projected long-term earnings growth rate of 18.3%.

Cardinal Health has a projected long-term earnings growth rate of 5.5%.

Thermo Fisher has an estimated long-term earnings growth rate of 18%.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

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Cardinal Health, Inc. (CAH) : Free Stock Analysis Report
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