Leading broker Macquarie has tipped an eyewatering 106% upside for ASX All Ords healthcare stock Monash IVF Group Ltd (ASX: MVF).
This comes after the IVF provider's shares suffered a 26% decline yesterday. The ASX All Ords healthcare stock reported an incident involving an embryo at its Clayton laboratory.
This marked the second reported incident in two months. Back in April, the company disclosed that a Brisbane patient was mistakenly implanted with another patient's embryo, sending Monash IVF shares down 36% that day.
In a statement today, Monash IVF said it was conducting an internal investigation into the latest incident. Management also said it had extended the scope of the independent review into the Brisbane incident. The company also noted it would be implementing additional safeguards.
What did Macquarie make of this? Let's see.
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Have Monash IVF shares been oversold?
The broker believes Monash IVF shares have been oversold and now offer compelling potential upside, despite potential reputational damage.
In a 10 June report, Macquarie said:
Despite incidents, we believe the share price has overreacted and valuation is attractive at current levels. We continue to see medium-longer term tailwinds for the IVF industry, with MVF well placed to capitalise on genetic testing growth.
Macquarie cited an "Increase in average age of new mothers, increased male infertility, increased success rates, increased donor services" as supportive industry tailwinds.
Grand View Research expects the Australian in vitro fertilisation market to grow at a compound annual growth rate (CAGR) of 7% from 2024 to 2030. Frozen Nondonor is expected to be the fastest-growing procedure type.
Has Macquarie changed its price target?
Monash IVF shares have rebounded today. They are trading 15% higher at the time of writing.
Macquarie downgraded Monash IVF shares on 20 May. However, the broker made no changes to its 12-month price target following yesterday's incident.
The broker has retained a price target of $1.30 on the ASX All Ords healthcare stock, which is currently changing hands for $0.63. That implies 106% upside from here.
In its 10 June report, Macquarie also noted:
MVF is currently trading on a ~53% discount to its 5-year historical average based on FactSet consensus 12-month forward EPS at 7.5x vs 5-year average of 15.8x. Similarly, relative to the ASX small ords, MVF's PE represents a 65% discount, below its 5-year average of -26%.
Over the past five years, Monash IVF shares have risen just 14%. This trails the S&P/ASX Small Ords Index (ASX: XSO), which has risen 25% over the same time frame.
