ResMed Faces Analyst Downgrade Amid Competitive Threats

ResMed shares fell over 5% after an analyst downgrade, indicating a bearish outlook on the company's future sales amid competition from Eli Lilly's potential product. The report suggests investors should closely monitor these developments to gauge potential impacts on ResMed's stock.

Date: 19-09-2024

AI Rating: 4

ResMed Inc. (NYSE: RMD) is currently under pressure following a downgrade from Wolfe Research, where the stock has been marked as an 'underperform.' This negative shift in recommendation has led to a significant decline in share value, more than 5%, which starkly contrasts with the S&P 500's modest decrease of 0.3%.

The analyst, Mike Polark, has placed a new price target of $180 for ResMed's shares, which is over 24% below the last closing price, emphasizing a negative sentiment regarding the company's stock trajectory. This significant drop in recommended stock price reflects cautiousness regarding the company's competitiveness, especially with upcoming threats from Eli Lilly. The analyst is concerned that the imminent launch of Eli Lilly's drug tirzepatide for obstructive sleep apnea could severely impact ResMed's sales, particularly of its continuous positive airway pressure (CPAP) products.

According to the report, there is a projected sales decline of 15% to 25% for ResMed due to this heightened competition. If Eli Lilly successfully obtains approval for its medication related to sleep apnea, ResMed may face considerable challenges. This forecast is a crucial factor for current and potential investors to be aware of, as pressure on sales can lead to reductions in revenues and profit margins.

While the report does not explicitly mention EPS, net income, or free cash flow metrics, the anticipated decline in sales can indirectly impact these financial measures. Investors should also consider the historical performance and future projections of the healthcare market, especially in segments similar to ResMed's products.

Overall, the analyst’s downgrade and the potential competitive threat from Eli Lilly suggest that unless ResMed can effectively counter these challenges, stock prices might continue to be adversely affected.

Stocks: RMD LLY