Stock of the day: ResMed

(AI video summary)

This video was created on 19 September for IG audiences by ausbiz.

Stock of the day: ResMed

ASX code: RMD

Suggestion: Hold

Impact of Eli Lilly’s GLP-1 drug

ResMed, a leader in sleep and respiratory device manufacturing, has recently faced notable challenges. ResMed is under pressure following a downgrade by Wolfe Research. The downgrade was due to perceived risks to ResMed’s sleep apnea device business from Eli Lilly’s GLP-1 drug, Ozempic. There are concerns that Ozempic could expand its indications to include obstructive sleep apnea, potentially reducing the demand for ResMed’s CPAP machines.

Market reaction and share performance

ResMed’s share price dropped by 3% in response to these concerns. This volatility isn’t new; the stock has consistently reacted to Eli Lilly's updates regarding Ozempic. Despite ResMed’s strong recent financial performance, an operating profit increase of 38% and healthy cash flows, the market remains cautious.

Investors keeping an eye on ResMed’s stock and the impact of Eli Lilly’s Ozempic on the sleep apnea market might consider exploring IG's advanced trading platforms. It’s essential to conduct thorough research and fully understand the risks involved in share trading before making any investment decisions.

Market sentiment and investment outlook

Analysts predict that Ozempic’s potential sleep apnea indication could lead to a decline in CPAP machine sales. A survey of 50 physicians revealed that half projected lower CPAP machine volumes in the future. It’s important to remember, though, that only 50% of sleep apnea cases are linked to weight; the other 50% are due to genetic factors.

While negative headlines surround ResMed, the company’s fundamentals are strong. Its most recent financial results indicate effective cost management and operational efficiency. For long-term investors, this may present a buying opportunity. However, caution is advised, as the stock could experience further declines. An attractive entry point might be around A$34.00, depending on future market developments.

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