In key news on Australian stocks, ResMed Inc. (AU:RMD) (NYSE:RMD) shares tumbled nearly 13%, as of writing, after a rival company’s weight-loss drug results sparked investor doubts over the company’s primary market for its sleep apnea drugs.
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ResMed is a U.S.-based company, that manufactures medical devices for sleep apnea, COPD (chronic obstructive pulmonary disease), and other chronic conditions. ResMed Australia functions as a subsidiary of ResMed Inc.
Why are ResMed’s Shares Falling?
ResMed shares started the week in the red zone after the U.S.-based pharmaceutical company Eli Lilly & Co. (NYSE:LLY) released favorable results last Friday for its Tirzepatide weight-loss treatment, which significantly reduced sleep apnea severity in trial patients.
Since obesity is a common cause of sleep apnea, an effective obesity treatment could reduce the number of patients needing ResMed’s CPAP (continuous positive airway pressure) treatment for sleep apnea, impacting its addressable market.
Analysts Remain Positive on ResMed’s Prospects
Despite investors’ concerns over ResMed’s future sales, analysts remain positive. After the shares dipped today, analyst Mathieu Chevrier from Citi reiterated a Buy rating on RMD stock, predicting an upside of 28.5%.
Similarly, Morgan Stanley analyst Sean Laaman estimates another 20% upside potential in the shares and maintains a Buy recommendation.
Laaman believes that the CPAP market might not be as vulnerable as some investors perceive, despite these positive results. He added that the increased awareness of sleep apnea will likely lead to more individuals seeking better ways to manage their health.
In its third-quarter results for FY24, ResMed reported 7% year-over-year growth in its revenue on a constant currency basis. Among its regions, revenue from the U.S., Canada, and Latin America increased by 9%, while Europe, Asia, and other markets saw a 3% increase.
Is ResMed a Good Stock to Buy?
According to TipRanks’ consensus forecast, RMD stock has a Strong Buy rating based on nine Buys and one Hold recommendation. The ResMed share price forecast is AU$34.93, which is 25% above the current trading level.
