ResMed Buy price raised
Recommendation
In ResMed set to awaken on 14 Oct 14 (Buy – $5.44), we picked out three factors behind ResMed's weak 2014 performance, which are all set for improvement – the destabilisation of the US market due to Medicare competitive bidding, better competitor products and a higher Australian dollar. The first-quarter result gave us further comfort on the first two of those (see ResMed Q1 2015 result from 24 Oct 14 (Buy – $5.68) and the Aussie dollar has now fallen almost 10% from US$0.94 at the end of June. On top of all this, there's been some hype about the company's new consumer product, the S sleep monitoring device, which this week went on sale in the Apple Store.
The market is apparently on top of all this, marking ResMed shares up 11% since the first of the above articles and about 30% since the stock hit a low of $4.68 in March due to concerns about the upcoming 2014 results. This puts the share price slightly above our $6 Buy price, but with prospects improving we're raising it to $6.50, which implies a forward multiple of 22 times the A$0.30 of earnings we'd expect for 2015 at current exchange rates. BUY.