Global Rollout Of AirSense 11 And Apple Partnerships Will Boost Market Presence By 2025

Key Takeaways

• Global expansion of AirSense 11 and SNAP technology rollout are expected to boost international sales, efficiency, and revenue growth.
  
• Partnerships and innovations in sleep health tech, including integrations with major companies, will elevate brand presence and drive long-term demand.
  
• Increased competition, foreign currency impacts, and challenging global expansion risks threaten ResMed's market share, revenue, and profit growth.

Catalysts

Develops, manufactures, distributes, and markets medical devices and cloud-based software applications for the healthcare markets.

• ResMed plans to expand the global availability of its AirSense 11 platform by launching in additional countries throughout 2025, which is expected to drive strong international device sales and have a positive impact on revenue growth.
  
• The development and expected rollout of SNAP technology that can operate across all home medical equipment (HME) management platforms will enhance resupply effectiveness, potentially improving both revenue and net margins as efficiencies increase.
  
• ResMed's ongoing partnerships with major tech companies, such as Apple, for sleep health technology integration and new product introductions like the AirTouch N30i fabric-based mask, are likely to elevate brand presence and drive increased revenue from new consumer health tech markets.
  
• ResMed is leveraging increasing interest in sleep health and the detection capabilities of consumer wearables, anticipating a gradual rise in patient numbers seeking treatment for sleep apnea. This trend is expected to foster sustained demand growth, positively impacting long-term revenue.
  
• The development of real-world evidence and partnerships with healthcare providers to promote CPAP alongside GLP-1 prescriptions for sleep apnea treatment is likely to result in increased adherence rates and device resupply, contributing to revenue growth and strengthening market position.

ResMed Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming ResMed's revenue will grow by 7.6% annually over the next 3 years.
• Analysts assume that profit margins will increase from 25.3% today to 28.1% in 3 years time.
• Analysts expect earnings to reach $1.7 billion (and earnings per share of $11.59) by about April 2028, up from $1.2 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.9x on those 2028 earnings, up from 26.1x today. This future PE is greater than the current PE for the AU Medical Equipment industry at 27.6x.
• Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.81%, as per the Simply Wall St company report.

ResMed Future Earnings Per Share Growth

Risks

• ResMed is experiencing negative impacts from foreign currency movements, which could affect future revenue if the U.S. dollar continues to strengthen.
  
• The expansion into global markets involves meeting different regulatory, reimbursement, economic, and cultural norms, posing risks that may impact net margins and operating profit if not effectively managed.
  
• Increased competition from consumer tech companies integrating sleep health functionalities and pharmaceutical advancements such as GLP-1s, which might impact ResMed’s market share and revenues.
  
• The possibility of tariffs affecting competitors relies strongly on political decisions, and changes may not materialize, which could affect ResMed's relative competitive advantage and devices revenue growth.
  
• Future reimbursement policies regarding GLP-1 drugs and CPAP therapy could impact pricing structures and payer strategies, affecting net revenue and gross margins if new medications bypass traditional treatments.

Valuation

• The analysts have a consensus price target of $270.088 for ResMed based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $295.0, and the most bearish reporting a price target of just $195.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $6.1 billion, earnings will come to $1.7 billion, and it would be trading on a PE ratio of 27.9x, assuming you use a discount rate of 6.8%.
• Given the current share price of $222.3, the analyst price target of $270.09 is 17.7% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.