Stifel cuts ResMed stock price target to $240 on CPAP market concerns

On Tuesday, Stifel analysts adjusted their outlook on ResMed (NYSE:RMD), a company specializing in medical equipment for treating sleep disorders, by reducing its price target to $240 from the previous $250. The firm maintained its Hold rating on the stock. According to InvestingPro data, ResMed, currently valued at $34.2 billion, appears slightly undervalued based on Fair Value calculations, despite six analysts recently revising their earnings expectations downward. The revision was based on insights from physicians indicating potential upcoming challenges in the Continuous Positive Airway Pressure (CPAP) market due to the growing use of GLP-1 drugs.

According to Stifel’s analysis, doctors anticipate that the proportion of CPAP patients who are also on GLP-1 medication will increase significantly over the next twelve months, rising from 15% to 31%. This expectation is rooted in the belief that GLP-1 drugs, which are a class of medications used in the management of type 2 diabetes and obesity, could lead to a decrease in mask adherence among CPAP users. Despite these concerns, InvestingPro analysis shows ResMed maintains excellent financial health with a perfect Piotroski Score of 9, suggesting strong operational efficiency and financial stability. Get access to 12 more exclusive ProTips and comprehensive analysis with an InvestingPro subscription.

Furthermore, the research indicated that around 18% of patients currently using both CPAP devices and GLP-1 drugs might no longer require CPAP therapy for their Obstructive Sleep Apnea (OSA) within one to two years, as their condition may be cured. This potential reduction in the need for CPAP devices could impact ResMed’s market.

Despite the concerns raised, the analysis by Stifel did uncover some positive aspects for the future of CPAP devices. There is an expectation of a boost from the increasing popularity of wearables that could drive CPAP starts, and the easing of practice capacity issues that had previously been a hindrance.

Stifel concluded their report by noting a cautious stance, reflecting these mixed insights. They also mentioned that their forecast for ResMed’s earnings per share (EPS) for the fiscal year 2027 is now the lowest among Wall Street predictions.

In other recent news, ResMed reported its Q2 FY2025 earnings, surpassing analyst expectations with an earnings per share (EPS) of $2.43, compared to the projected $2.32. The company also exceeded revenue forecasts, posting $1.28 billion against an anticipated $1.27 billion. Despite these strong earnings, ResMed’s stock experienced a decline in after-hours trading. The company has maintained a robust cash flow and declared a quarterly dividend, highlighting its financial stability. Additionally, ResMed has been added to Goldman Sachs’ APAC Director’s Cut Conviction List, indicating a positive outlook from the investment bank. This inclusion reflects confidence in ResMed’s growth strategy and potential for market share expansion, particularly in the CPAP market. ResMed has been focusing on innovation and digital health solutions, as evidenced by the launch of new products like the AirTouch N30i. The company’s strategic initiatives and strong market positioning are seen as contributing factors to its favorable assessment by Goldman Sachs.

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