Canaccord: Buy The Dip In Nevro After Disappointing Quarterly Report

Medical device manufacturer Nevro Corp NVRO's shares are tumbling after the company's first-quarter report after the close Monday. 

Nevro reported a wider-than-expected loss of 51 cents per share and below-consensus revenue for the quarter, while it reiterated its full-year 2018 revenue guidance.

The Analyst

Canaccord Genuity analyst Jason Mills maintained a Buy rating on Nevro and lowered the price target from $110 to $102.

The Thesis

The disappointment relative to expectations was mainly due to higher-than-anticipated seasonality, Mills said in a Tuesday note.

Structurally, the company is on solid footing, the analyst said. Nevro continued to add healthy numbers to its domestic salesforce, he said. 

The sequential slowdown in growth and share loss were due to challenging comparisons, as Nevro reported a blowout fourth-quarter of 2017 — and Q1 saw competitor product launches from Boston Scientific Corporation BSX and Medtronic PLC MDT, according to Canaccord. 

Nevro has grown in scale relative to competitors that are much larger and has been more impacted by seasonality as a result, Mills said. On a year-over-year basis, Nevro is clearly gaining market share, he said. 

Canaccord views the stock as being undervalued.

"In sum, while the quarter was clearly not the result we expected, we think the right move for investors, when they look back 12 months from now, will have been to accumulate shares on weakness," Mills said. 

Canaccord identified positive tailwinds in the spinal cord stimulation market, continued expansion of Nevro's sales force and the potential for an expansion in the company's total addressable market. 

The Price Action

Nevro shares were plunging nearly 16 percent to $77.62 at the time of publication Tuesday. 

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Photo courtesy of Nevro Corp.