Brokers believe
-Ventilator sales expected to double in the June quarter
-Unlikely to offset the drop in revenue from sleep apnoea diagnosis
-Weaker global economic conditions likely to weigh
The coronavirus pandemic has boosted demand for ventilators and
The increase in home sleep testing will only provide a modest offset. As new patients account for about 50% of revenue, the downward pressure on earnings could be substantial.
Stockpiling measures and an ongoing response to the pandemic should mean a revenue uplift and
Over April ResMed was awarded a contract by the US health department for 2550 ventilators by
Sales of these devices are expected to almost double again in the June quarter, countering an equally dramatic drop in revenue from the core sleep devices.
Slowdown
Morgan Stanley's channel checks with US-based CPAP (continuous positive airway pressure) suppliers suggests, while demand for product in March was strong, there is an expectation that April and beyond will slow because of reduced doctor referrals.
Beyond this,
Mask re-supply and software revenue is less exposed to the issues as the bulk of revenue comes from existing customers. Software service sales are sticky and should hold during a recession but growth in new customers is expected to slow.
Macquarie notes a new telehealth video chat has been rolled out, allowing patients and physicians to view data and communicate virtually. Management expects this will reduce the need for a recovering patients to return to hospital for follow-up.
The long-term strategy and growth potential remains intact, Credit Suisse ascertains. The increased investment in platforms outside the hospital means the company can benefit from any behavioural shift after the pandemic has passed, amid greater demand for home health care.
Moreover, Wilsons asserts, in some respects, the pandemic may accelerate aspects of the company's respiratory care strategy that were already in play, such as the increased use of ventilators in the long-term and harvesting treatment data from those devices to optimise the economics of delivering care.
Diagnosis of sleep apnoea is under-penetrated on a global basis as is treatment of chronic obstructive pulmonary disorder. While ventilators sales may contract once pandemic-related purchases subside,
Valuation
Goldman Sachs, not one of the seven stockbrokers monitored daily on the FNArena database, believes the trends warrant a premium valuation. Even excluding the pandemic-related growth, margins still expanded and earnings grew 47%.
The broker acknowledges the composition of
The database has one Buy (Morgans, yet to comment on the quarter), four Hold and two Sell ratings. The consensus target is
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