UPDATE: Removed reference to financial group Cowen & Co. after verification that it did not release any negative sentiments towards NuVasive based on the GlassHouse report.
NuVasive Inc. (NSDQ:NUVA) shares dropped over 7% after the release of a report from short seller GlassHouse Research which accused the company of “irregular accounting,” according to a Benzinga report.
The short seller’s report claims that the company was using accounting tricks to hide that its organic business is in decline, according to Benzinga, and accuses the company of inflating its earnings and growth numbers.
GlassHouse used the departure of former CFO Quentin Blackford and COO Jason Hannon as evidence of its issues, and set a $24.18 price target for the company, less than half of the $57.85 value it opened at yesterday, according to the report.
The company saw trading volume at 5.3 million shares yesterday, falling 7.5% to close at $53.54.
But the swing could be an opportunity for investors to get on board with the company, according to a Seeking Alpha report from Kratisto Investing CFA Stephen Simpson.
“The decline hasn’t come without some reasons, including a slower U.S. spine market, executive departures, and a subpoena from the OIG, but these don’t strike me as long-term issues. Instead, they remind me of a lot of the other short-term setbacks that have created interruptions in NuVasive’s long-term run. To that end, I believe strong revenue growth and margin leverage are still in play here, and I believe the shares are actually undervalued,” Simpson wrote.
The company still has risks, Simpson warned, but added that he “wouldn’t necessarily say that buying NuVasive is catching a falling knife,” according to the Seeking Alpha report.
The GlassHouse report was seen as “more “bark” than “bite” by Leerink Partner analyst Richard Newitter.
“We think the stock can begin to work once we get past 3Q as we exp Sep. stom activity will have an impact on rev/EPS and we ultimately think Street numbers will re-set lower afterwards – we believe this has been an overhang on the stock. But, following today’s pullback, we think the set-up into 2018 just got better and we continue to have confidence in NUVA’s 12 month new-product cycle driven growth acceleration story (plus an improving margin profile,” Newitter wrote.
In July, NuVasive saw shares drop after the medical device maker posted 2nd quarter earnings that beat EPS expectations but fell short on sales and showed shrinking profits compared to the previous year, alongside announcing a number of changes to its executive roster.