Jefferies Downgrades NuVasive, Says M&A Unlikely To Materialize

Shares of NuVasive, Inc. (NASDAQ: NUVA) spiked after the Financial Times named the company as a potential acquisition target.

A deal seems unlikely and, even if a bid is received, there is little opportunity of it being higher than $60 per share, according to Jefferies.

The Analyst

Jefferies’ Raj Denhoy downgraded NuVasive from Buy to Hold with an unchanged $60 price target.

The Thesis

The NuVasive story remains challenging, with a slowdown in spine and larger players gaining share, Denhoy said in a Tuesday downgrade note.

Although the company’s margins could expand, growth prospects remain bleak — and without them, the stock's valuation appears full, the analyst said. 

NuVasive’s growth has been decelerating steadily over the past several years, Denhoy said. While a sluggish U.S. spine market exerts pressure on NuVasive’s domestic performance, the company continues to witness stiffening competition from new technologies like robotics and larger competitors, he said. 

The company has yet to identify an offering that will hold the fort with the waning of the XLIF procedure, which had previously fueled growth, the analyst said. 

NuVasive’s initiatives to insource manufacturing are delayed and have not resulted in the expected benefits, Denhoy said, adding that the company may experience gross margin expansion through 2019 “as volumes work through inventory."

Price Action

NuVasive shares were down 0.29 percent at $55.96 at the time of publication Tuesday. 

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