Big Test for NeuroMetrix

Will Tuesday's earnings report show progress?
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NeuroMetrix

(NURO) - Get Report

has some nerves to calm.

The company, which markets a painless but controversial nerve test, could soothe rattled investors when it reports first-quarter results on Tuesday. But bears, who have sold more than half of NeuroMetrix shares short, believe the company could leave fans feeling even jumpier.

"I'm actually on the edge of my seat with respect to these numbers because I think they could be pretty bad," one short seller told

TheStreet.com

on Monday. "I think they lose money on an earnings-per-share basis and go negative on cash flow from operations."

To be fair, mainstream analysts expect better. A couple of them did downgrade NeuroMetrix back in the winter months due to reimbursement concerns, but others continue to recommend the company's stock even today.

The stock jumped 7.5% to $10.21 a share on Monday in anticipation of a positive update.

Piper Jaffray analyst William Quirk is among those hoping for improvement. Still, even he sees a "mixed quarter," with revenue falling short of expectations.

Quirk recently slashed his projection for actual device sales by nearly half for the first quarter. Meanwhile, he scaled back his growth outlook for the lucrative biosensers used to conduct the company's nerve studies as well.

As a result, Quirk now looks for NeuroMetrix to report first-quarter profits of 3 cents a share -- down sharply from recent quarters but in line with the consensus estimate -- rather than the 7 cents he had been previously banking on. Quirk blames negative local coverage decisions, or LCDs, for the company's setbacks.

Still, Quirk feels that investors understand NeuroMetrix's challenges and could enjoy better times ahead.

"We believe reimbursement uncertainties are more than reflected in NeuroMetrix's current valuation ... but anticipate continued volatility in NURO shares until additional clarity into the resolution of outstanding negative LCDs," Quirk stated on Monday. "That said, we believe NeuroMetrix's technology will ultimately lead to the reversal of unfavorable LCDs and believe longer-term investors will be rewarded."

Quirk, therefore, has an outperform rating on NeuroMetrix's stock. He recently lowered his price target on the stock to $20, however, which is about half the price it fetched this time last year. His firm makes a market in the securities.