JPMorgan Sees Double-Digit Sales Ahead For NuVasive, Upgrades To Overweight

J.P. Morgan’s Andrew R. Hanover believes that a “margin improvement story” is playing out at NuVasive, Inc. NUVA, which was likely to drive the stock up over the next 18-24 months.

Hanover upgraded the rating on the company from Neutral to Overweight, while raising the price target from $55 to $74.

Positive Trends

The analyst mentioned that the fundamentals of the spine market have been improving, with growth having stabilized in the 2 percent range, driven by positive underlying demographic trends that are offsetting pricing pressure.

NuVasive’s business has been consistently shielded from pricing declines, compared to its peers, due to the company’s positive mix from new product launches offsetting the low single digit headwind across its portfolio to a large extent.

“Combined with a focus on the faster growing MIS segment of the market, this has allowed NuVasive to consistently take share over time, rising from a small start-up to the #3 player in the industry over the past decade and a half,” Hanover stated.

Top Line & Sales Growth

The analyst expects the company to take more than 100 bps of market share in 2016 and 2017, indicating a double digit acceleration in top line growth and an increase in focus on profitability as NuVasice approaches $1 billion in sales.

In addition, the analyst believes that the 2016 guidance is conservative, with upside expected to the consensus forecasts, driven by NuVasive’s US Hardware business.

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