Could the Resmed (ASX:RMD) share price face a similar selloff to Kogan?

Could COVID-19 fueled earnings see the Resmed (ASX: RMD) share price meet the same fate as Kogan (ASX: KGN)?

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The ResMed Inc (ASX: RMD) share price is as choppy as they come. Its shares have experienced multiple V-shaped recoveries starting with the initial COVID-19 selloff in March last year. 

Why it could be sink or swim for ResMed

ResMed will announce its third-quarter FY21 (3Q21) financial and operational results on Thursday, 29 April after the New York Stock market closes. 

ResMed has played a critical role through the global pandemic, providing ventilators, masks and circuits to countries in need around the world. This has likely accelerated its earnings, like many other ASX healthcare and tech shares.

However, as the COVID-19 environment unwinds, many ASX growth companies have been unable to repeat the supercharged earnings experienced in FY20. 

This has particularly been the case for ASX e-commerce shares including Kogan.com Ltd (ASX: KGN), Redbubble Ltd (ASX: RBL) and Temple & Webster Group Ltd (ASX: TPW). All of which have copped a heavy discount since last week. 

However, the key difference is that Kogan, Redbubble and Temple & Webster have all run well above pre-COVID highs. This compares to ResMed which has gone full circle, delivering near-zero capital gain since February 2020.

Brokers weigh in on the ResMed share price 

Credit Suisse and Morgan Stanley have put forth their opinions on what to expect for the company’s 3Q21 results on Thursday. 

Credit Suisse is bullish on ResMed shares with an outperform rating and a $29.50 target price. The broker is forecasting revenue growth of 3% and earnings growth of 7% for the current quarter. Its commentary highlights the company cycling through US$35 million in benefits from the pandemic in terms of ventilator sales, which it has not included in revenue estimates. 

The broker believes the company’s cash position could be building up, which could trigger a potential share buyback in FY22. 

Morgan Stanley has been more reserved with its opinions, expecting the business to continue to work towards pre-pandemic levels in its core sleep business. The broker is forecasting device sales in the United States and the rest of the world to be down 3% and 11% on the prior corresponding period. 

Morgan Stanley rates the ResMed share price as equal weight with a $27.40 target price. 

ResMed shares are down 1.20% at the time of writing, trading at $26.79. 

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Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Kogan.com ltd and Temple & Webster Group Ltd. The Motley Fool Australia has recommended Kogan.com ltd, ResMed Inc., and Temple & Webster Group Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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