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On Tuesday, BTIG reaffirmed its Buy rating and $75.00 price target for Globus Medical (NYSE:GMED) despite the medical device company receiving a Warning Letter from the FDA regarding its manufacturing facilities. The letter, which addressed several deficiencies at the company's Audubon, PA location, specifically pertained to the ExcelsiusGPS system. This marks the first instance of Globus Medical receiving such a notice from the FDA, according to the analyst at BTIG.
The analyst noted that while the Warning Letter outlines issues that Globus Medical will need to address, the market's reaction, which resulted in an approximately 8% drop in the company's shares, seems excessive.
The decline in stock value amounted to roughly $1 billion, a significant contrast to the Emerging Technology segment's sales, which are largely derived from ExcelsiusGPS and were about 8% of the company's total in FY23. The segment is projected to account for approximately 6% in FY24, with sales ranging between $120 million and $140 million and growing at a high-teens rate.
The FDA's letter does not currently prevent Globus Medical from selling its ExcelsiusGPS product. Despite potential concerns that competitors might leverage this situation to their advantage in the spinal robotics market, the analyst believes that Globus Medical's strong market presence as the second-largest company in the spinal implant market will likely prevent major shifts in market share within the spinal hardware sector.
The optimism from BTIG is also supported by Globus Medical's recent performance, which has exceeded consensus expectations over the past two quarters. This growth has been attributed to the successful integration of legacy NuVasive (NASDAQ:NUVA) into the company, further solidifying its position in the market.
In other recent news, Globus Medical has reported a significant increase in sales for the second quarter of 2024, reaching $630 million, marking a 116% growth compared to the previous year. Non-GAAP earnings per share also rose to $0.75, a 20% year-over-year increase.
These results were largely driven by the successful integration of NuVasive, a recent acquisition that has substantially contributed to the company's performance. Globus Medical has also launched four new products and anticipates a record number of launches in the upcoming months.
Looking ahead, full-year net sales are projected to range between $2.47 billion and $2.49 billion, with non-GAAP EPS expected to land between $2.80 and $2.90. Globus Medical remains committed to its long-term growth strategy, focusing on robotics technology and expanding market penetration while aiming to achieve $170 million in cost synergies and a mid-70s gross profit profile in the long term.
InvestingPro Insights
Amidst the challenges presented by the FDA warning letter, Globus Medical (NYSE:GMED) demonstrates a robust financial outlook, as indicated by InvestingPro data. The company's aggressive share buyback strategy, highlighted by an InvestingPro Tip, suggests management confidence in the stock's value. Additionally, the expectation of net income growth for the year aligns with the company's strong sales performance and ongoing product launches.
InvestingPro data reflects a significant revenue growth of 103.89% over the last twelve months as of Q2 2024, with quarterly revenue growth reaching an impressive 115.93% in Q2 2024. The company's market capitalization stands at $9.06 billion, and while the P/E ratio appears elevated at 213.27, the adjusted P/E ratio for the last twelve months is a more moderate 33.79. This suggests that the market has high expectations for future earnings growth, despite the high earnings multiple noted by an InvestingPro Tip.
Furthermore, analysts on InvestingPro have revised their earnings estimates downwards for the upcoming period, indicating potential headwinds or recalibrated expectations. However, this is juxtaposed with a large price uptick over the last six months, indicating strong market performance. For a deeper dive into the financial health and future prospects of Globus Medical, InvestingPro offers additional tips, including the company's ability to cover interest payments with cash flows and its moderate level of debt operation.
InvestingPro also lists 12 additional tips for Globus Medical, providing a comprehensive analysis for potential investors. With the next earnings date set for November 5, 2024, and analysts assigning a fair value of $79, slightly above the previous close price of $73.05, the insights from InvestingPro could be pivotal for stakeholders monitoring the company's progress in addressing the FDA's concerns and maintaining its growth trajectory.
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