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ResMed Inc. (ASX: RMD) share price has been attracting attention recently, having fallen from a previous high of $33.10 per share.
The ASX 200 Healthcare share is currently trading at $30.27, down more than 8% from its previous high.
Respiratory device makers’ shares have been highly volatile in recent months due to concerns about the impact of GLP-1 weight loss drugs on the obstructive sleep apnea (OSA) market.
Despite these concerns, some experts are undeterred and remain bullish on the company. Let’s see what experts are saying about the future of ResMed stock and how they see the potential impact of these drugs.
Concerns seem ‘exaggerated’
In its July investment newsletter, Auscap Asset Management said: Has achieved great status We plan to purchase ResMed shares in the second half of 2023.
The company says it has grown earnings per share (EPS) at 15% annually over the past decade and maintained a return on equity (ROE) of more than 20%.
A big boost for ResMed was the fact that its competitor, Philips, recall ResMed tripled its market share of continuous positive airway pressure (CPAP) devices in June 2021 versus 2022, making the company a “major player in the space,” Auscap said.
CPAP machines are prescribed to OSA patients to help relieve symptoms of OSA and get adequate sleep.
But the rise of GLP-1 drugs is raising concerns, asset managers say.
Last year, ResMed announced that it had [GLP-1s] Helps patients achieve significant weight loss.
There is a strong correlation between OSA and body weight. GLP-1 drugs may reduce the number of patients suffering from OSA, which may result in a smaller market size for OSA.
Auscap also cited recent high-profile studies showing that GLP-1 drugs have a positive effect on OSA, which led to further selling in ResMed shares.
Nevertheless, Australian Cap is less convinced, noting that “the evidence is far from conclusive” and that “concerns appear to be exaggerated at this stage.”
ResMed noted that in a recent study of 660,000 patients diagnosed with OSA who were started on GLP-1, there was a 10.5% increase in the likelihood that patients would start positive airway pressure (PAP) therapy if they were prescribed a GLP-1 drug. Patients taking GLP-1 also had higher rates of PAP replacement at one and two years after setup.
He further added:
Feedback indicates that ResMed remains highly recommended as the CPAP standard of care, and physicians tend to consider GLP-1 as an adjunct to CPAP for OSA treatment…
“…ResMed is currently trading at a discount to its historical earnings multiples and even more so relative to the overall market. We believe this represents a great opportunity for long-term investors to buy at an attractive price. We see significant earnings growth for ResMed over the next few years.”
Other analysts are also bullish on ResMed stock.
Several analysts are also bullish on ResMed shares. Like Auscap, Wilsons and ECP Asset Management are also attracted to the company’s valuation.
Meanwhile, Bell Potter remains optimistic about ResMed’s prospects, despite recent concerns about GLP-1 drugs.
It also noted that ResMed has seen steadily increasing annual profits, with revenue growing 7% in the third quarter of fiscal 2024.
Bell Potter sets a $36.00 target price on ResMed shares, suggesting the stock is “undervalued and represents an attractive entry level for long-term investors.”
Stupid takeaway
Despite market concerns about the impact of GLP-1 weight-loss drugs, many experts remain bullish on ResMed.
Both Auscap and Bell Potter emphasized ResMed’s strong foundation and growth potential. However, this is no guarantee of future results. Moreover, as Auscap noted, the study is not conclusive, and the same is true in reverse.
What will happen if GLP-1 drugs are the breakthrough we need for OSA? Only time will tell.
As always, it’s important to conduct your own research and consider your investment objectives before making any decisions.
