A good rule of thumb on the Street is that if a company is beating expectations and the shares are still weak, you ought to approach with some caution. That’s been the case with NuVasive (NUVA), as the company has logged two solid better-than-expected quarters since my last update, but the shares are still down about 6% since then, lagging the broader medical device space by more than 20%.
Renewed fears that COVID-19 infections will lead to another round of postponed elective procedures are valid, as are concerns that reintroduced restrictions on in-person sales calls will hamper the launch of the new Pulse platform. Likewise, I’m sympathetic to the general idea that the spinal market isn’t as attractive as it once was.
Even so, I think this overlooks the progress the company has made in upgrading its portfolio – not just Pulse, but Modulus (3D-printed implants for interbody fusion), and the cervical portfolio. I don’t think my assumptions are ambitious, with mid-single-digit revenue growth, double-digit FCF growth, and mid-20%’s EBITDA margins supporting a fair value in the high $60’s to mid-$70’s, but this is clearly a name where sentiment is not with the stock.
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NuVasive Still Getting No Love With COVID-19 And Competitive Worries
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