Needham & Company analysts downgraded shares of Masimo Corp . (NASDAQ:MASI) to Hold from Buy, removing its price target for the stock in a note Wednesday.
They told investors that they see an unfavorable risk-reward for the stock. They add that while the potential Apple (NASDAQ:AAPL) watch royalties might be significant, they are "far from certain" and are now mostly priced into MASI's shares.
"Our scenario analysis shows a poor risk/reward around the potential outcomes of the ITC import ban and any royalties," the analysts said. "MASI's earnings power has taken a hit, and we think that the 2024 consensus EPS estimate may be too high."
Furthermore, the firm believes that while the separation of Sound United would be positive for MASI, it would likely be dilutive to the company's earnings per share.
"We also note that MASI's new consumer health products are receiving mixed reviews from early adopters. And MASI shares are trading at a significant premium to peers," the Needham analysts concluded.
MASI shares opened more than 3% lower on Wednesday, trading just above the $111 per share mark.