How Sleep Device Player ResMed Is Gaining Philips' Market Share In Flow Generator Market - Analysts Weigh In

Needham analyst Mike Matson reiterated a Buy rating on ResMed Inc. RMD with a price target of $180.

ResMed registered a street-beating performance in the first quarter, where revenue increased by 16% to $1.1 billion.

ResMed is benefiting from the Koninklijke Philips N.V.'s PHG flow generator recall, according to the analyst. 

With Philips out of the flow generator market, ResMed has had more demand than it could meet, given its supply chain challenges. 

However, its supply chain is beginning to improve, and ResMed is capturing an increasing portion of Philips' market share. 

While ResMed is gaining market share for now, the analyst expects a headwind when Philips reenters the device market and recaptures some portion of the market share it lost during the recall.

For FY24, the analyst lowered the revenue estimate to $4.592 billion from $4.683 billion.

RMD implemented a restructuring plan that reduced its workforce by ~5% and expects this to reduce its operating expense by ~300 bps, the analyst notes.

Matson writes that he is seeing similar moves across numerous industries; investors may interpret it as a negative sign given the heightened concerns about the impact of GLP-1s. 

However, RMD indicated that it is tracking thousands of patients on GLP-1s and using CPAPs, and so far, the data shows no change in adherence or resupply rates, the analyst notes.

Matson maintains a Buy rating given RMD's low P/E multiple and the analyst's projection that the company can sustain 5-7% revenue growth. 

Oppenheimer analyst Suraj Kalia reiterated the Outperform rating on ResMed, with a price target of $175.

Per Kalia, Philips Class I recall has presented ResMed with some unique structural tailwinds that will persist for some time.

Hence, in the current environment, the company deserves a premium to the aggregate space. 

That said, GLP-1s impact on OSA will be real, and multiple expansions will be relatively grind, the analyst adds.

Price Action: RMD shares are trading lower by 3.03% to $134.53 on the last check Friday.