UPDATE: Goldman Sachs Downgrades Globus Medical as Execution, Share Gains are Offset by Valuation
In a report published Monday, Goldman Sachs analyst David H. Roman downgraded the rating on Globus Medical (NYSE: GMED) from Buy to Neutral, and lowered the price target from $19.00 to $18.00.
In the report, Goldman Sachs noted, “We downgrade shares of Globus Medical, Inc. (GMED) to Neutral from Buy and lower our 12-month price target to $18 ($19 prior). GMED shares have rallied +70% ytd vs. +26% for the Russell 2000. We see the recent Aetna policy change to deny coverage for cervical interbody devices as shaving approximately 0.8%-0.9% off of our prior 2014E revenue estimates alone – a figure which could become more meaningful if additional commercial payers follow suit, placing incremental pressure on the company's outer-year growth trajectory. As a result, we have lowered our sales estimates by 0.9%/1.0%/1.4% annually for 2014/2015/2016E to reflect new pressures in cervical spine, with an eye toward caution as/if challenges emerge in other areas of spine therapeutics and/or at a greater number of payers. At current levels near our estimate of fair valuation (currently 20.1X our 2014E EPS of $0.89 vs. 16.1X for orthopaedic peers), we see more favorable risk/reward elsewhere in our coverage. Since being added to the Americas Buy List on 8/28/12, GMED is +19% vs. the Russell 2000 +34%, as the company missed consensus revenue estimates in two of its first four quarters post-IPO.”
Globus Medical closed on Friday at $17.23.
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