ResMed (RMD-0.6%) has risen ~8.2% since Phillips (PHG-0.1%) announced a recall of millions of sleep apnea and ventilator machines on Monday citing health risks.
With San Diego, California-based medical device maker well outperforming the broader market including its rival over the past five-day period, Bank of America has cut its rating to underperform from neutral.
The analyst Lyanne Harrison sees an overreaction in shares to competitor’s product recall. With shares trading at an all-time high and above historical P/E, the analyst cites valuation as the reason for the downgrade.
Harrison estimates a $24M near-term upside and argues that the further tailwinds are limited by the company’s supply chain challenges and the year-end launch of AirSense 11.
In May, J.P. Morgan analyst David Low upgraded ResMed to overweight from neutral, noting the upcoming commercial rollout of AirSense 11.