Please ensure Javascript is enabled for purposes of website accessibility

Here's Why Nevro Corp. Shares Fell 16.9% Today

By Todd Campbell – Updated Nov 6, 2018 at 4:15PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The company's third-quarter earnings and guidance for slowing unit sales are causing shares to slide.

What happened

Shares in Nevro Corp. (NVRO 0.99%) tumbled 16.9% on Tuesday after the company reported third-quarter financials that were shy of consensus estimates.

So what

The company's Senza is a device that uses neurostimulation of the spinal cord to reduce chronic pain in patients. In Q2, revenue was $96 million, up 23% year over year, and earnings per share (EPS) were recorded as a loss of $0.35, which was $0.04 lower than analysts were expecting.

A man listens through a wall using a glass.


The situation was similar in the third quarter as sales grew 16.3% year over year, to $95.63 million, and EPS came in $0.08 below expectations, at a loss of $0.37 per share.

The flat sequential performance in the quarter has management saying it now expects its full-year sales to be at the low end of its prior guidance of between $385 million to $390 million.

Now what

During the company's third-quarter conference call, management indicated that unit growth has slowed markedly to a single-digit pace, and that slowdown is likely to continue. 

That's discouraging when you consider Nevro's operating costs are increasing faster than sales. Last quarter, operating expenses were $76.5 million, up 23% from the same quarter last year. It's also disappointing because the company's got some other overhangs, including turnover in its sales team, that would be less worrisome if sales were growing more quickly. 

If the slowdown persists and losses continue, it could pressure Nevro's balance sheet. A cash crunch isn't imminent because the company has $258 million in cash, cash equivalents, and short-term investments, and $150 million in long-term debt exiting September, but investors will still want to watch cash burn from here if the company's spending continues to grow more quickly than revenue.  

Todd Campbell has no position in any of the stocks mentioned. His clients may have positions in the companies mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Nevro Corp. Stock Quote
Nevro Corp.
$43.73 (0.99%) $0.43

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.