On Wednesday, Piper Sandler provided an optimistic update on Masimo Corp . (NASDAQ:MASI). The firm raised the shares target to $165 from $160 while maintaining an Overweight rating on the stock.
The adjustment followed Masimo's second-quarter revenue announcement of $496 million, which matched the company's preliminary figures released in July. The gross margin percentage and adjusted earnings per share exceeded both Wall Street expectations and the company's own previous guidance.
The improved financial guidance prompted by these robust results reflects the operational enhancements within Masimo's healthcare segment.
According to the firm, these improvements are becoming more apparent and support the case for a higher valuation of the company's healthcare business.
The analyst noted that with the upcoming potential update on the consumer division separation and the Annual General Meeting (AGM) scheduled for the following month, the company's narrative is expected to remain dynamic in the near term.
The firm suggests that investors should concentrate on the ongoing positive trends in the healthcare business, which indicate sustainable improvements. These trends, as observed, are contributing to a valuation for the RemainCo healthcare franchise that should be significantly higher than the current market price of Masimo's shares.
Piper Sandler expressed continued confidence in Masimo, elevating the company on their list of preferred stocks. The firm's analyst recommended buying shares, reiterating the belief in the company's strong performance and upward potential, which is reflected in the updated price target of $165.
In other recent news, Masimo Corp reported strong preliminary results for the second quarter of 2024, exceeding both consensus estimates and the company's own guidance.
The Healthcare division's success was a key factor, with revenues reaching $344 million, a 22% year-over-year increase. However, the non-healthcare revenue experienced a decline, posting $152 million.
Stifel and BTIG maintained a Buy rating on Masimo's stock, with Stifel reiterating a $170 price target and BTIG a $166 target. Piper Sandler upgraded Masimo's stock from Neutral to Overweight, reflecting improvements in the company's core healthcare business.
In addition, Masimo is in active discussions to sell a majority stake in its consumer business, potentially valued between $850 million to $950 million. This development has led to Masimo raising its guidance for healthcare revenues and non-GAAP EPS.
Institutional Shareholder Services (ISS) has advised shareholders of Masimo to vote for the election of two director candidates put forward by Politan, an activist investment firm.
ISS asserts that additional changes are necessary at the medical device company, despite Politan having secured two board seats in the previous year's election. These are recent developments within Masimo Corporation.
InvestingPro Insights
As Masimo Corp. (NASDAQ:MASI) garners positive attention from analysts, InvestingPro data and tips provide a deeper dive into the company's financial health and market position. With a market capitalization of $5.87 billion and a high price-to-earnings (P/E) ratio of 73.39, Masimo's valuation reflects expectations of future growth. The company's gross profit margin remains robust at 49.28%, indicating a strong ability to control costs relative to revenue.
InvestingPro Tips suggest that net income is expected to grow this year, with five analysts having revised their earnings estimates upwards for the upcoming period. Additionally, Masimo's liquid assets exceed its short-term obligations, providing financial flexibility. For investors seeking more comprehensive analysis, there are additional InvestingPro Tips available, including insights into the company's profitability, return on assets, and market performance over the last decade, which can be found at InvestingPro.
While Masimo does not pay a dividend, suggesting a reinvestment of earnings into the company, the high earnings and EBITDA valuation multiples indicate that the market has high expectations for the company's growth. This aligns with Piper Sandler's optimistic outlook and the raised price target to $165, suggesting that Masimo's current narrative and future prospects may continue to attract investor interest.
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