The Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) share price has been sold-off today after opening the trading session at an all-time high. The medical device company's share price may have topped for the short term, after having a stellar run in 2019.
Why is Fisher & Paykel trading lower?
Earlier today, Fisher & Paykel released a notice to the market relating to the issue of ordinary shares. A total of 13,206 new shares were issued today, bringing the total number of ordinary shares on issue to 574,431,601 to date.
The share issue could explain the company's share price trading lower, however it could also be safe to assume that investors are taking profit heading into the weekend and Christmas break.
How has the Fisher & Paykel share price performed this year?
The Fisher & Paykel share price has stormed more than 76% in 2019, hitting an all-time high of $21.99 today. Interest in the medical device company has surprised some analysts, which has found great potential for growth in the US market. The company's core products are sleep apnoea machines that aid breathing conditions. These products can be used in both hospital and in-home settings.
Earlier this year Fisher & Paykel delivered record sales and profit for FY19. The company posted operating revenue of NZ$1.07 billion and net profit after tax of NZ$209.2 million, an increase of 9% and 10%, respectively, on the year prior. The hospital segment has been the company's outperforming sector, with sales for the segment up 12% from the year prior to NZ$642.3 million.
What is the outlook for Fisher & Paykel?
Fisher & Paykel has received regulatory clearance in the United States to sell its F&P 'Vitera' mask. The redefined product is used to treat obstructive sleep apnoea and contains unique technologies that provide high levels of stability and durability.
With Vitera already available in Australia, Canada and Europe, US regulatory approval prompted the company to raise its financial guidance for FY20. Management expect that operating revenue for the financial year ending 31 March 2020 to be around $1.19 billion, with net profit after tax in the range of $225 million to $265 million. The company's previous guidance for FY20 operating revenue was around $1.17 billion and net profit after tax was anticipated to be between $245 million to $255 million.
Broker note
Earlier this month equity analysts from Citi retained a sell rating on Fisher & Paykel, despite lifting their price target for the company to NZ$17.75 ($16.92). Analysts cited that the medical device company reported first half results that were in line with expectations, however the company's share price is overvalued at the current price.
Foolish takeaway
Fisher & Paykel has been in an upgrade cycle in 2019, with the company's main competitor ResMed Inc (ASX: RMD) following suit. The company has a recurring and defensive earnings profile that is leveraged by a growing and gloabl niche market. Although the share price may be stretched, a prudent strategy would be to keep Fisher & Paykel and wait for a pullback before buying shares in the company.
