The ResMed Inc (ASX: RMD) share price is rising on Monday morning.
At the time of writing, the sleep treatment focused medical device company's shares are up 2% to $38.04.
This follows a positive night of trade for the US-listed ResMed share price on Friday night.
Can the ResMed share price climb even higher?
One leading broker that believes the ResMed share price may have peaked for the time being is Goldman Sachs.
According to a note, the broker has retained its neutral rating and lifted its price target on the company's shares to $36.20.
Based on the latest ResMed share price, this implies potential downside of almost 5% over the next 12 months.
What did Goldman say?
Goldman notes that ResMed expects an FY 2022 revenue benefit of US$300 million to US$350 million relating to the recall of rival Philip's competing products. This is significantly less than the US$750 million to US$800 million of device sales Philips generates annually.
The broker believes that the constraint on further upside is more a function of supply than demand, due to component shortages. However, it also notes that Philips has previously stated that component shortages and distribution bottlenecks are surmountable. Therefore, it sees limited reason why ResMed could not achieve a similar outcome.
Earnings estimates upgraded
Goldman has upgraded its estimates to reflect this benefit and other items.
It commented: "We post +15% EBITDA upgrades in FY22E, primarily to account for a material increase in flow generator sales, but also additional mask sales (not included in the guided $300-350m tailwind). We also upgrade our FY23E EBITDA by +4% on the same drivers (net of cost upgrades), but we highlight inherent upside to these forecasts should execution of the recall and/or reputational impacts drag materially beyond 12 months."
However, this isn't enough for a more positive rating. It believes the ResMed share price is looking expensive at the current level.
Goldman explained: "Clearly, RMD has a substantial opportunity to capture sustainable share, but we believe the earnings upgrades that could follow today's update may not justify US$11bn (A$15bn) of additional market capitalisation since mid-May (31-37x the guided FY22 revenue tailwind). Valuation of 32x NTM EV/EBITDA is now +54% vs. history, and we remain Neutral-rated."
