Buying The Dip In Nevro Pays Off For Investors After Court Ruling

Prior to a big bounce Wednesday morning, Nevro Corp NVRO stock was down nearly 50 percent in the past month. Much of the drop came Tuesday following what the market perceived as bad news tied to the company’s patent dispute with Boston Scientific Corporation BSX.

Yet Nevro shares are up 35 percent Wednesday, and analysts said those who bought the dip made the right call.  

The Analysts 

JPMorgan analyst Robbie Marcus reiterated an Overweight rating on Nevro with a $77 price target. 

Canaccord Genuity analyst Jason Mills reiterated a Buy rating with an $80 price target.

JPMorgan's Take

A U.S. District Court ruled Tuesday that four of the seven patents involved in the dispute are invalid, and Boston Scientific was granted non-infringement on all remaining claims.

JPMorgan's Marcus said the market seems to have initially misinterpreted the news as negative for Nevro, but his interpretation is the exact opposite.

“Our interpretation is that while Boston doesn’t infringe Nevro’s three remaining patents with its current trials and U.S. commercialized tonic stimulation devices ... the ruling does imply that any attempt to actually commercialize a high-frequency device in the US remains an infringement of Nevro’s remaining patents ‘102 and ‘472,” the analyst said in a note.

Canaccord’s Take

Canaccord's Mills said in a Wednesday note that investors shouldn’t be too quick to throw the baby out with the bathwater.

“In fact, NVRO lawyers’ interpretation of the summary judgment — per our conversation with management AMC — is that it did indeed render ‘invalid as indefinite’ Nevro’s ‘system’ patents, but they believe the ruling actually upheld its ‘method’ patents,” the analyst said.

The method patents are key to the technology application and should limit competition, Mills said. 

Following Tuesday’s sell-off, Nevro’s stock was trading at a 60-percent discount to the rest of the small-cap med-tech group based on estimated 2018 enterprise value-per-sales, according to Canaccord. 

Where The Stock Goes From Here

Dip buyers who got ahead of the trade Wednesday are enjoying huge gains, but analysts forecast even more potential upside ahead for Nevro stock.

Nevro shares were up 34.06 percent at $59.24 at the time of publication Wednesday.

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Photo courtesy of Nevro.