Goldman Sachs' New Pair Trade: Bull Zeltiq Aesthetics, Bear NuVasive

In a report published Tuesday, Goldman Sachs analyst David Roman revisited the small-cap names under his coverage and noted that he is sticking with his view that product cycles and US cyclical exposure (hospital capex/utilization) remain the "most prominent" drivers of upside. "Historically, smaller pure-play companies seemed to hold the upper hand in MedTech, as the pace of product innovation tended to exceed that of larger peers, R&D teams were more nimble to adapt to changing demands, and physicians held the bulk of vendor selection power," Roman wrote.

Zeltiq Aesthetics: Upgrading To Buy

Roman upgraded shares of

Zeltiq Aesthetics IncZLTQ

to Buy from Neutral with a $36 price target following a 410 basis point year-to-date outperformance versus the Russell 2000 index. Roman analyzed the 100 wealthiest zip codes in the U.S. by adjusted gross income, national weather patterns, and the current

CoolSculpting installed base and account penetration. The analyst concluded from the study that the company is only approximately 30 percent penetrated in the market, implying a positive growth trajectory. As such, greater patient adoption and expanded indications should also improve utilization through 2020. Roman also noted that additional opportunities also exist in adjacent territories and in other markets throughout the country. In addition, competing technologies do not offer the same economic value at the practice level that CoolSculpting does. NuVasive Downgraded To Neutral Roman downgraded shares of NuVasive, Inc. NUVA to Neutral from Buy as shares are approaching his $52 price target. Despite the downgrade, the analyst's fundamental views on the company's competitive position and margin expansion efforts remain positive. The company stands to gain share in the spinal implant market through a combination of next generation implants and procedure systems that will be driven by a sales force expansion. Roman also noted that he is beginning to see a slowing rate of share gains the past two quarters, which could cap near-term revenue upside potential. Coupled with the fact that shares drastically outperformed the Russell 2000 index by more than four thousand basis points, a Neutral stance is more appropriate.

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