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

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Nevro Corp. NVRO is well-poised for growth, backed by strong international presence, solid prospects in the Spinal Cord Stimulation (SCS) market and commitment toward innovation. However, intense competition remains a concern.

Shares of Nevro have soared 179.3%, outperforming the industry’s growth of 8.5% in a year’s time. Further, the S&P 500 Index rallied 16.8%.

The company, with a market capitalization of $4.18 billion, is a medical device company engaged in developing and commercializing a neuromodulation platform for the treatment of chronic pain, primarily in the leg.  It anticipates earnings to improve 13% over the next five years. Moreover, it has delivered a positive earnings surprise of 31.8% in the last reported quarter.

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

What’s Deterring the Stock?

Intense competition in the SCS market remains a woe. Per management, the primary competitive factors include company brand recognition, clinical research leadership, pricing and reimbursement.

Factors to Bolster Nevro

Nevro continues to benefit from sturdy international foothold, thereby driving overall performance. Per management, growth in Europe is anticipated to improve worldwide revenues in 2019.

Further, robust prospects in the SCS market have been favoring the company over a considerable period of time. Aging demographics, high cost related to therapy, strict regulatory approvals and an excessive reliance on the traditional SCS therapy are the primary factors driving the global SCS market.

Per a Market Data Forecast report, the global SCS market is estimated to reach $2,827.4 million at a CAGR of 8.6% (between 2018 and 2023).

Consistent focus on innovation has been crucial in bolstering the company’s overall performance.

Strong outlook for 2019 instills investor optimism in the stock. Notably, the company now expects worldwide revenues between $383 million and $386 million (up from the previously guided range of $368-$374 million).

Which Way Are Estimates Headed?

For 2020, the Zacks Consensus Estimate for revenues is pegged at $437.9 million, indicating an improvement of 13.3% from the year-ago reported figure. The same for adjusted loss per share stands at $2.92.

Stocks to Consider

Some better-ranked stocks in the broader medical space are Cerner Corporation CERN, AmerisourceBergen Corporation (ABC - Free Report) and Chegg, Inc. CHGG, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Cerner’s long-term earnings growth rate is estimated at 13.6%.

AmerisourceBergen’s long-term earnings growth rate is pegged at 7.4%.

Chegg’s long-term earnings growth rate is estimated at 30%.

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