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On Tuesday, Stifel maintained its Buy rating and $80.00 price target for shares of Globus Medical (NYSE:GMED), despite a recent FDA warning letter concerning the company's adverse event data handling. The FDA's warning letter, which was made public this morning, pertains to issues with the capture, processing, and documentation of adverse events related to the Excelsius system.
According to the analyst from Stifel, the warning letter and the preceding Form 483, which is a notice of deficiencies found during FDA inspections, are administrative and revolve around the need for additional data in response to previous inquiries from the agency. Globus Medical has reportedly provided answers that they believe should resolve the FDA's questions, which are not related to the product or manufacturing processes.
Globus Medical's management does not consider the warning letter significant enough to affect their operations, as they do not foresee any impact on manufacturing or commercial activities. This was also the reason the company did not disclose the receipt of the initial Form 483 or the warning letter last month.
Stifel's conversation with Globus Medical's management suggests that there will be no need for additional expenditures to address the issues raised by the FDA, implying that the company's earnings potential should remain unaffected.
The analyst noted that the warning letter was unexpected and acknowledged that such news typically leads to market volatility. However, after reviewing the situation and discussing with Globus Medical's management, Stifel expressed confidence that the market's reaction to the news might be overstated.
In other recent news, Globus Medical Inc. has posted impressive financial results for the second quarter of 2024. The medical device company reported a significant sales increase, 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 (NASDAQ:NUVA), a recent acquisition that has substantially contributed to the company's performance.
In further developments, Globus Medical launched four new products and anticipates a record number of launches in the upcoming months. 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. The company is also aiming to achieve $170 million in cost synergies and a mid-70s gross profit profile in the long term.
Despite acknowledging market competition and potential dissynergy, Globus Medical remains committed to its long-term growth strategy, focusing on robotics technology and expanding market penetration.
InvestingPro Insights
As Globus Medical (NYSE:GMED) navigates through the FDA's scrutiny, the company's financial health and market performance continue to be of interest to investors. According to InvestingPro data, Globus Medical boasts a market capitalization of $9.15 billion, underscoring its considerable presence in the medical device sector. The company's growth is reflected in its remarkable revenue increase over the last twelve months as of Q2 2024, with a 103.89% surge, indicating a robust expansion of its business operations.
Despite the high earnings multiple, with a P/E ratio of 214.52, the adjusted P/E ratio for the same period stands at a more modest 33.79, which may suggest that investors are expecting future earnings growth to justify the current valuation. Furthermore, the company's gross profit margin remains strong at 67.66%, highlighting its ability to maintain profitability amidst its growth trajectory.
InvestingPro Tips for Globus Medical reveal that management has been actively repurchasing shares, which could be a sign of confidence in the company's future prospects. Additionally, the company's net income is expected to grow this year, aligning with Stifel's optimistic outlook despite the FDA warning letter. It's worth noting that there are 12 additional InvestingPro Tips available for Globus Medical, which could offer further insights into the company's financial nuances and investment potential. Interested readers can find these at InvestingPro's dedicated page for Globus Medical.
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