Benzinga - by Vandana Singh, Benzinga Editor.
Needham upgraded ResMed Inc (NYSE: RMD) from a Hold to Buy rating with a price target of $180.
The analysts Mike Matson, Joseph Conway, and David Saxon note that ResMed's shares are down 31% since the start of August (versus a 2% decline in the S&P 500), mainly due to concerns about the potential for GLP-1 obesity drugs to reduce demand for ResMed's sleep therapy devices.
The analysts expect two negative effects of GLP-1s.
- First, patients using continuous positive airway pressure (CPAP) who lose significant weight with GLP-1s may stop using their CPAPs, which would result in reduced mask sales.
- Second, patients with undiagnosed sleep apnea who lose significant weight with GLP-1s may no longer be diagnosed, resulting in reduced flow generator sales.
The analysts say that additional pressure is coming from Philips' (NYSE: PHG) possible re-entry into the flow generator market, which could hurt ResMed's growth.
Needham says that Philips' re-entry will impact ResMed's growth more than the GLP-1s.
The analysts' Base-case estimate suggests that ResMed could see a ~3% headwind to its revenue growth from these two items over the next few years.
Even with the headwinds, Needham writes that ResMed can sustain 5-7% revenue growth above its large-cap peers, for which median 2022E-2024E revenue growth is estimated at 5.1%.
Price Action: RMD shares are down 0.32% at $153.40 on the last check Wednesday.
Latest Ratings for RMD
| Jan 2022 | Citigroup | Upgrades | Neutral | Buy |
| Jan 2022 | RBC Capital | Upgrades | Underperform | Sector Perform |
| Jan 2022 | JP Morgan | Upgrades | Neutral | Overweight |
View the Latest Analyst Ratings
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