Yesterday was a forgettable day for Monash IVF Group Ltd (ASX: MVF) shareholders.
The ASX All Ords healthcare company's shares fell 12% after the fertility treatment firm downgraded its guidance for FY 2025. The company now expects its underlying net profit after tax to be approximately $27.5 million, down from its previous guidance range of $30 million to $31 million.
At the time of writing, Monash IVF's share price sits at 74 cents.
The company has been recently plagued with scandal after it was revealed in April that an Australian woman had unknowingly given birth to a stranger's baby. A Brisbane Monash IVF clinic accidentally implanted another woman's embryos into a client. This incident attracted significant media attention, which continues to weigh on investor sentiment.
Since peaking in May 2024, Monash IVF shares are down nearly 50%. Does the company have further to fall, or is this a buying opportunity?
Macquarie forecasts substantial upside
Macquarie remains bullish on the company's prospects.
After reviewing the result, Macquarie has lowered its price target by 18.8% from $1.60 to $1.30. However, this new target still implies 80% upside.
This suggests that existing Monash IVF investors should hang in there. For those yet to invest, this could present a compelling buying opportunity. If Macquarie is right, a $10,000 investment in Monash IVF could be worth $18,000 within the next 12 months.
In a 20 May Macquarie note, the broker reiterated structural tailwinds that it believes position the company to succeed.
This includes trends for the IVF industry. Grand View Research expects the Australian in vitro fertilisation market to grow at a CAGR of 7% from 2024 to 2030. During this period, frozen Nondonor is expected to be the fastest-growing procedure type. Monash IVF currently operates 13 permanent clinics across Australia.
According to Macquarie, Monash IVF is also positioned to benefit from "an increase in average age of new mothers, increased male infertility, increased success rates, and increased use of donor services".
Between 2010 and 2022, the average age of Australian first-time mothers increased from 28.3 years to 29.8 years.
Macquarie also considers generic testing developments as a potential catalyst for further upside. In November 2023, genetic testing was added to the Medicare Benefits Schedule (MBS), including reproductive carrier testing for cystic fibrosis, spinal muscular atrophy, and fragile X syndrome. These are the most inheritable genetic conditions and can reduce life expectancy.
The testing is available to those looking to become pregnant. Macquarie expects more individuals to take up this option, and that a portion of those tested will be converted to IVF cycles, driving "significant incremental IVF cycles in the coming years."
Foolish Takeaway
There's no doubt Monash IVF shares have taken a hit lately, with the Brisbane clinic incident continuing to weigh on sentiment. Yesterday's profit downgrade was another piece of bad news for the ASX All Ords healthcare stock. Despite these issues, Macquarie continues to see medium longer-term tailwinds for the IVF industry. According to the broker, Monash IVF is well placed to capitalise on these trends.
