ResMed Inc (ASX: RMD) shares are falling on Tuesday.
In afternoon trade, the medical device company's shares are down over 2% to $22.90.
While this is disappointing, it could prove to be an excellent buying opportunity for investors.
That's the view of analysts at Citi, which have just reiterated their bullish view on the stock.
Citi tips big returns for ResMed shares
Citi has been looking at the quarterly update from rival Philips and believes that there are positive read-throughs for ResMed.
As a result, the broker has reiterated its buy rating and $39.00 price target on the company's shares.
This implies a potential upside of approximately 70% for investors over the next 12 months.
What did Citi say?
The broker was pleased with commentary from Philips, which has been battling with a huge product recall. It notes that ResMed's rival appears unlikely to return to the market with big discounts.
Read-throughs from Philips' Q3 result. Philips reported its Q3 result. Philips announced that it began to serve new sleep patients outside of the USA. Philips qualified the return to market as "encouraging" and the "welcoming does not go with significant pricing differences." We view the commentary on the lack of significant discounting as positive for ResMed. In the USA, Philips remains in discussions with the US DoJ/FDA on a proposed consent decree.
In addition, Citi points out that Philips revealed that it doesn't see any real impact from the rise of GLP-1s such as Ozempic as weight loss wonder drugs. (A large proportion of sleep apnoea sufferers are classed as overweight.) Citi commented:
On GLP-1s, Philips "currently don't see a major impact" and believes "there is a big undiagnosed patient group in sleep."
Overall, the broker believes ResMed is well-positioned for growth over the near term and sees the multiples its shares trade on as very attractive. It concludes:
ResMed consensus has Devices sales CAGR of 6% over FY23-26e, in line w/ historical market growth, implying little impact from Philips or GLP-1s. We view the fears around GLP-1s as overly pessimistic but acknowledge that the multiple (PE FY25 ~20x vs. ~24x pre-covid) could remain under pressure pending the SELECT and SURMOUNT-OSA trials data in Nov'23 and mid-2024. Buy.
