Morgan Stanley Downgrades ResMed Rating Amid Market Concerns
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 3 days ago
0mins
Source: seekingalpha
- Rating Downgrade Impact: Morgan Stanley downgraded ResMed (RMD) from Overweight to Equal Weight, primarily due to market pressures from GLP-1 weight-loss drugs and the potential re-entry of Philips (PHG) into the U.S. sleep device market next year, which may limit the company's re-rating prospects.
- Increased Market Competition: Eli Lilly's weight-loss therapy Zepbound has been approved for treating obese patients with obstructive sleep apnea, a market that ResMed's CPAP devices serve, indicating heightened competitive risks for the company.
- Earnings Growth Forecast Cut: The analyst projects ResMed's net profit growth at approximately 5% YoY for fiscal 2027, lower than the consensus estimate of 4%, contrasting with the company's three-year EPS growth of 19% as of March 2026, highlighting a slowdown in earnings growth.
- Price Target Reduction: The analyst lowered ResMed's price target from $286 to $230 per share, indicating that despite strong free cash flow and a solid balance sheet, the company is expected to face constraints on near-term earnings growth, reflecting a cautious market outlook on its future performance.
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Analyst Views on RMD
Wall Street analysts forecast RMD stock price to rise
11 Analyst Rating
6 Buy
5 Hold
0 Sell
Moderate Buy
Current: 186.290
Low
260.00
Averages
294.00
High
345.00
Current: 186.290
Low
260.00
Averages
294.00
High
345.00
About RMD
ResMed Inc. is a holding company. The Company, through its subsidiaries, in the development, manufacturing, distribution and marketing of medical devices and cloud-based software applications that diagnose, treat and manage respiratory disorders, including sleep disordered breathing (SDB), chronic obstructive pulmonary disease, neuromuscular disease and other chronic diseases. Its segments include Sleep and Breathing Health segment and the Residential Care Software segment. It also operates a Software as a Service (SaaS) business in the United States and Germany that includes out-of-hospital software platforms designed to support the professionals and caregivers who help people stay healthy in the home or care setting of their choice. Its products and solutions are designed to improve patients' quality of life and reduce the impact of chronic disease. Its cloud-based digital health software applications, along with its devices, are designed to provide connected care.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- International Market Response: While US stocks declined, overseas markets performed strongly, with the Euro Stoxx 50 reaching a new record high and closing up 0.68%, demonstrating global investor confidence in economic recovery, which may contrast with the US market's performance.
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- Oil Price Decline Affects Market Sentiment: The agreement between the U.S. and Iran to reopen the Strait of Hormuz has led to crude oil prices dropping to a 3.5-month low, enhancing risk-on sentiment in the markets and contributing to stock gains.
- FOMC Meeting in Focus: Market participants are closely watching the outcome of the FOMC meeting, where interest rates are expected to remain unchanged, but the guidance from new Chair Kevin Warsh will significantly impact market sentiment.
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Morgan Stanley Downgrades ResMed Rating Amid Market Concerns
- Rating Downgrade Impact: Morgan Stanley downgraded ResMed (RMD) from Overweight to Equal Weight, primarily due to market pressures from GLP-1 weight-loss drugs and the potential re-entry of Philips (PHG) into the U.S. sleep device market next year, which may limit the company's re-rating prospects.
- Increased Market Competition: Eli Lilly's weight-loss therapy Zepbound has been approved for treating obese patients with obstructive sleep apnea, a market that ResMed's CPAP devices serve, indicating heightened competitive risks for the company.
- Earnings Growth Forecast Cut: The analyst projects ResMed's net profit growth at approximately 5% YoY for fiscal 2027, lower than the consensus estimate of 4%, contrasting with the company's three-year EPS growth of 19% as of March 2026, highlighting a slowdown in earnings growth.
- Price Target Reduction: The analyst lowered ResMed's price target from $286 to $230 per share, indicating that despite strong free cash flow and a solid balance sheet, the company is expected to face constraints on near-term earnings growth, reflecting a cautious market outlook on its future performance.
See More
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ResMed Faces Potential 30% Share Decline
- Market Expectation Adjustment: Hedgeye analyst Tom Tobin highlighted that as GLP-1 drug prices decrease, the total addressable market (TAM) for sleep apnea is shrinking, predicting at least a 30% decline in ResMed's shares, indicating a market underestimation of its growth algorithm.
- Price Correction Trend: ResMed's shares have already fallen over 30% from their 2025 peak, and Tobin believes that as consensus estimates come under pressure, the market will continue to seek a new, lower valuation level, further impacting share performance.
- Obesity Rate Impact: Tobin cautioned that rising obesity rates have quietly been a tailwind for ResMed over the past two decades, but the proliferation of GLP-1 drugs is now shrinking its potential customer base, particularly among overweight and obese populations.
- Short Selling Pressure: ResMed has a short interest of 9.4%, reflecting market concerns about its future performance, and investors should closely monitor the upcoming Q3 2026 earnings report to assess the company's ability to navigate these market challenges.
See More
US Stocks Plunge as Tech Sector Weighs Down Market
- Market Weakness: On Wednesday, the S&P 500 Index fell by 1.21%, the Dow Jones Industrial Average dropped by 0.98%, and the Nasdaq 100 Index declined by 0.99%, reflecting market concerns over potential interest rate hikes by the Fed, particularly amid weak performance in technology stocks.
- Economic Data Support: Despite the market downturn, US May retail sales rose by 0.9% month-over-month, surpassing expectations of 0.6%, indicating resilient consumer demand, while pending home sales increased by 3.8% month-over-month, marking the largest gain in 20 months, potentially providing some support to the market.
- Fed Policy Outlook: The Fed maintained interest rates at its meeting on Wednesday but indicated through its dot plot that at least one more 25 basis point hike is expected this year, with the 2026 year-end federal funds rate projection raised to 3.75%, reflecting a cautious outlook on future economic conditions.
- International Market Response: While US stocks declined, overseas markets performed strongly, with the Euro Stoxx 50 reaching a new record high and closing up 0.68%, demonstrating global investor confidence in economic recovery, which may contrast with the US market's performance.
See More
Mixed Performance in US Stock Indices, Chipmakers Lead Gains
- Strong Economic Data: US May retail sales rose 0.9% month-over-month, exceeding expectations of 0.6%, indicating resilient consumer demand that could positively impact future spending and economic recovery.
- Housing Market Recovery: Pending home sales in May increased by 3.8% month-over-month, significantly surpassing the expected 0.9%, marking the largest gain in 20 months, suggesting a rebound in the real estate market that may stimulate growth in related sectors.
- Oil Price Volatility: The agreement between the US and Iran to reopen the Strait of Hormuz has driven crude oil prices down to a 3.5-month low, increasing risk-on sentiment in the market, which may lead investors to reassess the risks and returns of energy-related assets.
- FOMC Meeting Focus: The market anticipates that the Federal Reserve will keep interest rates unchanged, but the press conference by new Chair Kevin Warsh will be pivotal, as investors closely watch his outlook on inflation to guide future investment decisions.
See More
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- Strong Market Performance: The S&P 500 index rose by 0.23%, the Dow Jones Industrial Average increased by 0.26%, and the Nasdaq 100 climbed by 0.74%, reflecting market confidence in economic recovery, particularly driven by strong performances from chipmakers.
- Retail Sales Exceed Expectations: U.S. May retail sales increased by 0.9% month-over-month, surpassing the expected 0.6%, indicating resilient consumer demand that could further stimulate economic growth and influence future monetary policy.
- Oil Price Decline Affects Market Sentiment: The agreement between the U.S. and Iran to reopen the Strait of Hormuz has led to crude oil prices dropping to a 3.5-month low, enhancing risk-on sentiment in the markets and contributing to stock gains.
- FOMC Meeting in Focus: Market participants are closely watching the outcome of the FOMC meeting, where interest rates are expected to remain unchanged, but the guidance from new Chair Kevin Warsh will significantly impact market sentiment.
See More
Morgan Stanley Downgrades ResMed Rating Amid Market Concerns
- Rating Downgrade Impact: Morgan Stanley downgraded ResMed (RMD) from Overweight to Equal Weight, primarily due to market pressures from GLP-1 weight-loss drugs and the potential re-entry of Philips (PHG) into the U.S. sleep device market next year, which may limit the company's re-rating prospects.
- Increased Market Competition: Eli Lilly's weight-loss therapy Zepbound has been approved for treating obese patients with obstructive sleep apnea, a market that ResMed's CPAP devices serve, indicating heightened competitive risks for the company.
- Earnings Growth Forecast Cut: The analyst projects ResMed's net profit growth at approximately 5% YoY for fiscal 2027, lower than the consensus estimate of 4%, contrasting with the company's three-year EPS growth of 19% as of March 2026, highlighting a slowdown in earnings growth.
- Price Target Reduction: The analyst lowered ResMed's price target from $286 to $230 per share, indicating that despite strong free cash flow and a solid balance sheet, the company is expected to face constraints on near-term earnings growth, reflecting a cautious market outlook on its future performance.
See More
Latest Wall Street Ratings Overview
- GE Vernova Rating: Bernstein initiates GE Vernova as outperform, citing the potential for U.S. natural gas to displace coal globally, thereby reducing electricity costs and providing reliable power, which could drive the stock price higher.
- NeoVolta Buy Rating: Needham initiates coverage on NeoVolta with a Buy rating and an $8 price target, indicating significant upside potential for the battery company, reflecting strong market demand for its products.
- Nvidia Outlook: Bernstein reiterates Nvidia as outperform, emphasizing the enormous and still early data center market opportunity, suggesting that the company's leadership in technology will continue to drive stock price growth.
- Allegiant Acquisition Boost: Goldman Sachs reinstates Allegiant as a Buy with a $125 price target, believing that the acquisition of Sun Country will provide incremental profitable growth opportunities, enhancing the company's competitive position in the market.
See More
ResMed Faces Potential 30% Share Decline
- Market Expectation Adjustment: Hedgeye analyst Tom Tobin highlighted that as GLP-1 drug prices decrease, the total addressable market (TAM) for sleep apnea is shrinking, predicting at least a 30% decline in ResMed's shares, indicating a market underestimation of its growth algorithm.
- Price Correction Trend: ResMed's shares have already fallen over 30% from their 2025 peak, and Tobin believes that as consensus estimates come under pressure, the market will continue to seek a new, lower valuation level, further impacting share performance.
- Obesity Rate Impact: Tobin cautioned that rising obesity rates have quietly been a tailwind for ResMed over the past two decades, but the proliferation of GLP-1 drugs is now shrinking its potential customer base, particularly among overweight and obese populations.
- Short Selling Pressure: ResMed has a short interest of 9.4%, reflecting market concerns about its future performance, and investors should closely monitor the upcoming Q3 2026 earnings report to assess the company's ability to navigate these market challenges.
See More
