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Medtronic (NYSE:MDT) was downgraded to Hold from Buy with its price target cut to $85 from $121 per share by Deutsche Bank analysts on Wednesday.
They told investors in a research note that there are too many headwinds, and the company has had a challenging 12 months with “several product issues in CY 4Q:21 and then macro headwinds impacting EPS growth in FY23.”
“This has led to MDT trading off 38% from a September 2021 peak. We have maintained our Buy rating despite these issues due to: (1) The potential for the pipeline to reignite growth; (2) Cheap valuation in a defensive tape; and (3) Positive risk/reward profile with a call option from the pipeline,” wrote the analysts. “As we updated our models ahead of FY2Q:23 earnings (albeit with only two months of data), we are lowering our FY2Q:23 revenue to $7.665b vs consensus of $7.718b and revise our EPS to $1.26 vs consensus of $1.27.”
The analysts also said that as they analyze the segment revenue data for fiscal Q2 2023 and then revise their fiscal second half 2023 ramp and incremental FX headwinds, they are becoming more cautious and have reduced their FY23 estimates to $5.47 vs consensus of $5.55 and guidance of $5.53 – $5.65.
“We believe MDT can provide upside to investors with longer time horizons, as seen by our FY25 estimates only 2% below consensus; however, we believe MDT should trade in line with the market over the next 12 months – which warrants us moving to Hold,” they concluded.
