The Pro Medicus (ASX:PME) share price has dropped 8% in 3 days. What’s going on?

The dip in Pro Medicus shares is accompanied by a sector-wide sell-off.

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Shares in Pro Medicus Limited (ASX: PME) have had a poor run these past few days after falling off a high of $62.48 on 30 November.

There’s been no market-sensitive information out of the Pro Medicus camp in this time. But that hasn’t stopped investors selling off shares violently. The company opened Monday’s session at $55.93 after pre-market trading.

What’s up with Pro Medicus shares?

Despite the recent weakness, shares in the health imaging IT provider were a standout performer in November. They closed out the month 17% in the green – well ahead of most healthcare majors.

However, the dip in Pro Medicus shares is accompanied by a sector-wide sell-off. This sell-off has been in situ since we rolled into December.

For instance, the S&P/ASX 200 Health Care Index (XHJ) has slipped 5% since the end of November, and shows no sign of slowing from the open today.

Concern around the Omicron COVID-19 variant and frothy share markets around the world has many investors taking risk off the table and seeking more defensive positions in safer assets, according to recent analysis from Goldman Sachs and JP Morgan.

Goldman has even lowered its 2022 US GDP forecasts from 4.2% to 3.8%, citing risks and potential impacts of the new strain, according to reporting from Bloomberg Intelligence.

This activity appears to have boded poorly for ASX health care shares, Pro Medicus included.

Although, the team at investment bank Citi reckons the pullback in the company’s share price is warranted.

The firm rates Pro Medicus a sell at $45/share and reckons that investors could be overly optimistic in their growth projections for the company.

Citi notes the presence of many substitute products from Pro Medicus’ competitors that could originate in future. This poses a threat to the company’s profits and could compress its margins going forward, the broker says.

In the absence of any price-sensitive information out of the company’s camp lately, it appears that weakness in the wider sector has spilled over into names like Pro Medicus as a negative catalyst to its share price.

Pro Medicus share price snapshot

In the past 12 months the Pro Medicus share price has climbed more than 90%. Pro Medicus shares have rallied 67% this year to date.

However, they have taken a backward step in the last month and are almost 7% in the red. The Pro Medicus share price has fallen 6.65% in just the last week of trading.

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The author has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus Ltd. The Motley Fool Australia has recommended SDI Limited and Sonic Healthcare Limited. 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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