Pro Medicus Ltd (ASX: PME) shares were on fire on Thursday.
The health imaging technology company's shares ended the day 8% higher at $307.39.
Investors were scrambling to buy its shares after it announced two major new contract wins.
This latest gain means that the high-flying share is now up almost 140% since this time last year.
Can Pro Medicus shares keep rising?
Unfortunately, one leading broker believes that the company's shares are close to peaking, at least for the time being.
But before getting onto that, let's hear what the broker is saying about yesterday's big news. It said:
PME has announced the renewal and extension of its contract with Franciscan Missionaries of Our Lady Health System (FMOLHS) based in Louisiana. The original contract from 2016 was for $7m over 7 years. The deal announced today is for $20m over 5 year and includes rate rises in addition to new business for Open Archive.
The second and larger deal is with U. Colorado Health and involves the full stack (viewer, workflow and archive) – all cloud deployed, PLUS Visage 7 Cardiology. This was a big win ranking 2nd in terms of revenues behind the Trinity deal from November 2024 ($330m 10 years) and ahead of Baylor Scott White from September 2023 ($140m over 10 years).
Bell Potter isn't overly surprised with the deals given how the current environment is favourable for Pro Medicus' Visage offering. It adds:
The drivers of the uptake of the Visage system remain firmly in place. Swift deployment, radiologist shortages, upload speed and sensational visualisation are the key selling elements. Very pleasing to see the second deployment announced for the cardiology system as well.
Downgrade
Despite the great news, Bell Potter has downgraded Pro Medicus shares to a hold rating (from buy) with an improved price target of $320.00 (from $280.00).
Based on its current share price, this implies only modest potential upside of 4.1% for investors over the next 12 months.
Commenting on the downgrade, Bell Potter said:
The strong earnings growth is likely to continue in the medium term and sustain the current share price, subject to bouts of volatility driven by macro events. The PME implementation team have a full schedule in the coming quarters as outlined in figure 1 and for this reason the company is unlikely to capture more than one quarter of exam revenues from U. Colorado in FY26. Revenues are increased by ~3% in FY26. Earnings increases are negligible. PT is increased to $320, recommendation is downgraded to Hold from Buy based on movement in valuation.
