Baird has reaffirmed its positive stance on ResMed (NYSE: RMD), a company specializing in sleep apnea treatment and other respiratory-related medical equipment, maintaining an Outperform rating and a price target of $280.00.
The endorsement follows insights gained from the company's Analyst Day, which highlighted ResMed's growth potential in the sleep market from fiscal years 2025 to 2030.
The firm's analysis suggests that ResMed is well-positioned to capitalize on the expanding sleep market and achieve growth rates at or above the market's acceleration.
The potential growth is underpinned by ResMed's strategic use of its technologies, data, and reach, as well as its research and development efforts aimed at both new and existing opportunities.
According to Baird's assessment, ResMed's focus on increasing market penetration and expanding margins should contribute to its financial performance over time.
The firm's evaluation indicates that while execution remains a critical factor for ResMed, the clearer visibility into the company's long-term growth prospects reinforces confidence in the projected upside, which is considered vital to the investment thesis.
The firm's commentary emphasizes that ResMed's elevated multiple—a measure of the stock's valuation relative to its earnings—is justified by the improved growth visibility. This perspective is based on the company's capacity to leverage its resources to enhance its market position and financial outcomes in the forthcoming years.
In other recent news, ResMed has been the subject of numerous analyst reviews following the presentation of an upbeat long-term outlook at their recent investor day.
RBC Capital raised its price target for ResMed to $224, maintaining a "Sector Perform" rating. This was based on the company's robust forecast up to 2030, driven by advancements in artificial intelligence, higher resupply rates, and plans to venture into new markets.
ResMed reported a 9% increase in group revenue for the fourth quarter of fiscal year 2024, reaching $1.22 billion, primarily driven by strong mask sales in the United States. The company also reduced its debt by $300 million and repurchased 232,000 shares for $50 million. Despite these positive financial results, major investment firms such as Oppenheimer and Needham maintained a Hold rating on ResMed, citing potential challenges in the sleep apnea market due to the rise of GLP-1 therapies.
Mizuho Securities and Baird, on the other hand, reaffirmed their Outperform ratings, with Mizuho even raising its price target. Conversely, Wolfe Research downgraded ResMed to Underperform, pointing to potential market disruption.
InvestingPro Insights
ResMed's strong market position and growth potential, as highlighted in Baird's analysis, are further supported by real-time data from InvestingPro. The company's revenue growth of 10.95% over the last twelve months and a robust EBITDA growth of 18.69% underscore its expanding market presence. This aligns with Baird's positive outlook on ResMed's ability to capitalize on the growing sleep market.
InvestingPro Tips reveal that ResMed has raised its dividend for 12 consecutive years, demonstrating a commitment to shareholder value that complements its growth strategy. The company's strong return over the last year, with a 66.81% price total return, reflects market confidence in its business model and future prospects.
Investors should note that ResMed is trading near its 52-week high, with its current price at 95.67% of the 52-week peak. This high valuation is consistent with Baird's justification of ResMed's elevated multiple based on improved growth visibility. For a more comprehensive analysis, InvestingPro offers 16 additional tips for ResMed, providing deeper insights into the company's financial health and market position.
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