ResMed CDI (ASX: RMD) shares are trading at $31.94 apiece on Friday, up 0.60% for the day and outpacing the ASX 200, which is up 0.17%.
ResMed stock is up 25.8% in the year to date but this includes a two-month lull over May and June so far.
During this period, the share price has been rangebound between about $31 and $33 per share.
This is well below the 12-month price target of several brokers.
So it begs the question, are ResMed shares a buy while they are stuck in the doldrums?
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ResMed shares overcome last year's panicked sell-off
As the chart above shows, ResMed shares were sold off in the second half of last year.
The sleep apnoea device maker lost market capitalisation mainly because investors started feeling nervous about the potential impact of GLP-1 drugs like Ozempic on demand for ResMed's products.
They feared an impact because GLP-1 drugs are incredibly effective in treating obesity, and this disease is a common precursor to sleep apnoea.
That fear sent ResMed shares tumbling to a four-year low of $21.14 on 13 October.
But the stock has rebounded significantly after the company and many brokers educated investors.
The key messages included that sleep apnoea has many different causes — not just obesity.
Secondly, the total addressable market (TAM) remains enormous despite any impact GLP-1s might have on rates of obesity worldwide.
What ResMed told shares investors about GLP-1s
ResMed CEO Mick Farrell told investors last October that in-house modelling had quantified the impact of GLP-1s on ResMed's TAM.
He said GLP-1s may cost the company 200 million people in terms of TAM. However, the total TAM for sleep apnoea worldwide would still be 1.2 billion by 2050 after taking GLP-1s into account.
At the time, 22.5 million people were using ResMed CPAP machines. Thus, Farrell successfully demonstrated the small proportionality of the GLP-1 risk to ResMed's business.
Then in January, Farrell revealed further in-house research that found GLP-1s were actually bringing in more customers for ResMed.
The research showed a 10% increase in patients on GLP-1s buying sleep apnoea machines.
This is happening partly because the GLP-1 hype has encouraged people to see their doctor about their obesity for the first time. During these consultations, sleep apnoea has also been identified, leading to more people buying ResMed products.
Blackwattle Investment Partners reckon ResMed has actually "turned the GLP threat into an opportunity" by raising awareness of the combined healthcare benefits of GLP-1 drugs and CPAP products.
Brokers say it's not too late to buy
Bell Potter has a buy rating on ResMed shares and a 12-month price target of $36. Citi has the same rating and price target. Macquarie has an outperform rating on the stock with a $34.85 price target.
Based on these targets, ResMed shares have room for 10% to 13% more share price growth.
Lachlan Hughes, a portfolio manager at Swell Asset Management, says ResMed has "decades of growth ahead as the penetration is low and it's the number one player in its market".
