What’s going on with the Pro Medicus (ASX:PME) share price?

Pro Medicus shares are falling heavily again…

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The Pro Medicus Limited (ASX: PME) share price is out of form again on Monday.

In early trade, the health imaging technology company’s shares have fallen 5% to $51.51.

This means the Pro Medicus share price is now down 17.5% since the start of the year.

Why is the Pro Medicus share price falling?

Investors were selling down the Pro Medicus share price last week amid weakness in the tech sector and a bearish broker note out of Morgans.

In respect to the latter, the broker downgraded the company’s shares to a reduce rating with a $54.59 price target.

Morgan made the move on valuation grounds following recent share price strength, which it felt had run ahead of fair value in the short term.

It commented: “We continue to view PME as a high quality name with a competitive product and long-term contracted revenues, but remain cautious on short-term valuation grounds, trading at 150x FY22F PE.”

Back to hold

That downgrade didn’t last long. In light of the sharp pullback in the Pro Medicus share price last week, this morning Morgans upgraded its shares to a hold rating with the same price target.

While it acknowledges that its shares still trade on lofty multiples despite last week’s selloff, the broker sees enough value to warrant a more positive rating.

Though, it isn’t necessarily recommending investors start buying shares just yet. Morgans thinks the $50 mark is a good entry point.

Morgans commented: “Given the valuation, happy to remain active and trim overweight positions but long-term thematic and earnings visibility remains strong to retain a core holding for the long-term. Looking for weakness for an entry price around A$50 for new positions.”

The way the tech sector is performing right now, investors may not have long to wait for a buying opportunity at the $50 level.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns and has recommended Pro Medicus Ltd. The Motley Fool Australia owns and has recommended Pro Medicus 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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