The ResMed Inc (ASX: RMD) share price continues to take a beating on Monday after releasing its third-quarter results last week. Its shares have lost almost 9% in the last two trading sessions.
At the time of writing, the ResMed share price is down 5.24%, trading at $24.80.
Why is the ResMed share price under pressure?
The narrative for the ResMed share price is similar to that of Kogan.com Ltd (ASX: KGN), Redbubble Ltd (ASX: RBL) and Temple & Webster Group Ltd (ASX: TPW).
COVID-19 supercharged the demand for ResMed products such as ventilators, masks and circuits. As the global pandemic unwinds, companies are finding it challenging to surpass elevated earnings experienced in FY20.
Brokers weigh in on the dip
Citi: Undervalued but cautious
ResMed continues to perform well operationally under a difficult environment, according to Citi. The broker believes that are many upsides for the business in a post-COVID world, including higher market growth with the return of its previous sleep apnea patients, market share gains with its new Airsense 11 device and increased penetration in the chronic obstructive pulmonary disease (COPD) market.
Citi believes the RedMed share price is about 10% undervalued but cautiously downgraded its rating from buy to neutral. Its target priced also retreated from $29.00 to $28.50.
Credit Suisse: Tough comparables but industry upside in FY22
Credit Suisse describes the March quarter result as a disappointment at the revenue level, although the company is cycling a period of tough comparables.
Looking ahead, the broker eyes ResMed's new CPAP device, AirSense 11, which is expected to be widely launched in the US by the end of 2021. The broker believes the industry will enter a resupply cycle in FY22 for devices, forecasting approximately 11% device growth in the US.
Credit Suisse retained an outperform rating and slightly lowered its share price target from $29.50 to $29.00.
Macquarie: Medium-term forecasts are unchanged
The March quarter results were below Macquarie's expectations, but gradual recovery in new patient growth is anticipated across 2021-22.
The broker remains positive in the medium-term, leaving forecasts unchanged. A neutral rating was retained, and the target price reduced from $28.00 to $27.50.
Morgans: Current headwinds are more cyclical than structural
Morgans described the current headwinds for the business as cyclical rather than structural. It believes an upgrade cycle is imminent, with its next-generation sleep apnea platform due for commercialisation by the end of the year.
Looking at the third-quarter result, the broker felt the performance was mixed as underlying revenue growth was flat, gross margins were contracting on higher costs and an unfavourable product mix. However, profit was slightly ahead of expectations on lower opex, improving patient flows and ongoing mask resupply.
Morgans rated the ResMed share price as an add but lowered its target price from $30.09 to $29.14.
