The COVID-19 pandemic has seen a global spike in demand for respiratory humidifiers and ventilation devises. Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) has been an early beneficiary of the surge in demand in this space, with the company issuing a profit upgrade this week.
ResMed Inc (ASX: RMD) is another medical device and software company that could benefit from the unprecedented demand. So, should you be buying shares in ResMed?
How and why will ResMed benefit?
ResMed is a global leader in respiratory medical devices, particularly targeted towards the treatment of sleep apnoea. In addition, the company also produces non-invasive ventilators that are used to boost the oxygen intake of patients.
The COVID-19 pandemic has sparked a huge demand in humidifiers and ventilators as the virus has detrimental effects on the respiratory system. ResMed has signalled that the company has seen a substantial jump in demand for ventilators, especially in South Korea and China.
How has ResMed responded?
ResMed has assured shareholders that despite the closure of some Chinese factories, the company's supply chain had not been materially affected and global demand for products can still be met. Management maintained that supply chains will remain uninterrupted if there is a surge in demand as the majority of ResMed's manufacturing facilities are in Australia and Singapore.
ResMed did note however, that the company could see a slowdown in the diagnosis of new patients for sleep apnoea as the attention moves to the management of COVID-19.
What is the outlook for ResMed?
The ResMed share price has been in a steady uptrend over the long-term, however shares fell more than 11% in today's trading session. The negative price action could be the result of ResMed's aforementioned forecast that it could see reduced demand for its sleep apnoea devices. ResMed's ventilators currently contribute 10% of the company's group sales, so investors could be pricing in the impact of a decline in sleep-apnoea devices in the long term.
Should you buy?
In my opinion, the ResMed share price should definitely be on the watchlist for long-term investors. The Fisher & Paykel share price has bucked the extreme volatility of global markets and shows that any stock that is strong in the current conditions is well-poised for the long term.
The only concern with ResMed is that its ventilator sales only contribute a small amount to overall sales and revenue. Nevertheless, I think that as long as the company's share price holds up, it could be a long-term buy.
