Fannie Mae, Freddie Mac shares tumble after conservatorship comments
On Tuesday, BTIG analyst Ryan Zimmerman downgraded Globus Medical shares (NYSE:GMED) from Buy to Neutral, citing concerns following the company’s first-quarter results for 2025. According to InvestingPro data, the medical device manufacturer, currently valued at nearly $8 billion, has seen its stock decline by over 30% in the past six months, while trading significantly below its Fair Value estimate. The analyst’s decision comes after a period of strong performance from the company’s stock but is driven by recent developments that suggest potential issues within the core Spine business, particularly after the integration of NuVasive (NASDAQ:NUVA).
In the analyst’s commentary, it was noted that while initial reactions to Globus Medical’s earnings call were optimistic, believing that the Spine business would remain stable, subsequent industry results led to a reevaluation. InvestingPro data reveals that 11 analysts have recently revised their earnings expectations downward, despite the company maintaining strong fundamentals with a healthy gross profit margin of 67% and robust current ratio of 4.45. The deceleration in the Spine sector was not unique to Globus Medical, as other companies also reported slower growth. However, Medtronic (NYSE:MDT)’s fourth-quarter results for fiscal year 2025 indicated that it gained more revenue than what Globus Medical lost, raising questions about the latter’s market share.
The downgrade reflects the analyst’s concern that Globus Medical will face challenges in meeting its growth targets for the Spine business for the remainder of fiscal year 2025. To reach the midpoint of its guidance, the company would need to significantly accelerate year-over-year Spine growth in a market that is expected to be stable or slowing. The analyst expressed skepticism about the company’s ability to achieve this without revising its full-year guidance.
Additionally, the analyst acknowledged that the performance of Nevro and Emerging Technologies could provide some support to Globus Medical’s Spine business. However, there is a belief that even if these areas do well, it may not be enough to satisfy investors who were already skeptical about the strategic rationale behind Globus Medical’s transactions.
In summary, the downgrade to Neutral and the removal of the price target by BTIG reflect a tempered outlook for Globus Medical’s stock performance. The analyst concluded that until the company can address these challenges and demonstrate a clear path to growth, the shares are unlikely to outperform. InvestingPro subscribers have access to over 12 additional exclusive tips and a comprehensive Pro Research Report for GMED, offering deeper insights into the company’s financial health, which currently maintains a "Great" overall score despite recent market challenges.
In other recent news, Globus Medical reported its first-quarter 2025 financial results, revealing unexpected shortfalls in both revenue and earnings. The company posted sales of $598.1 million, which was below the anticipated figures, primarily due to supply chain issues and lower sales of Enabling Technology products. Despite these challenges, Globus Medical achieved a record level of free cash flow for a first quarter and successfully repaid all outstanding debt from the NuVasive merger, emerging with no debt on its balance sheet. In response to the financial results, Oppenheimer and Truist Securities adjusted their price targets for Globus Medical to $78 and $68, respectively, while maintaining their Perform and Hold ratings. BTIG also lowered its price target to $77 but maintained a Buy rating, highlighting concerns over the company’s recent performance and the potential impact of rapid mergers and acquisitions.
Additionally, Globus Medical launched a $500 million stock buyback program, aiming to address what its CFO described as a disconnect between intrinsic value and market valuation. The repurchase will be funded through existing cash reserves and reflects the company’s commitment to long-term shareholder value. Analysts noted that while the recent acquisition of Nevro may be more dilutive to earnings than initially expected, Globus Medical remains optimistic about future quarters. However, concerns persist regarding prolonged deal closures and increasing competition in the robotic surgery space. These developments indicate that Globus Medical is navigating a complex landscape of financial and operational challenges, while also taking strategic steps to enhance shareholder value.
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