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Globus Medical Stands On The Brink Of Inflection; Leerink Upgrades

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Considering Globus Medical Inc (NYSE: GMED) on the verge of significant revenue growth acceleration, Leerink Swann upgraded the musculoskeletal medical device company to Outperform and increased its price target from $29 to $40.

The firm has been anticipating the ratings change since it downgraded Globus Medical in July.

“We had been of the mindset there would eventually be an organic growth acceleration pick-up later in 2017 and that the company would likely be worth re-visiting in mid-2017,” analysts Richard Newitter and Ravi Misra wrote in a note.

Now, Globus Medical is nearing its predicted inflection point, and Leerink foresees a shift from negative to positive growth in the first half of 2017. Additionally, it expects about 14 percent year-over-year revenue growth through the second quarter of 2018.

Source Of Strength

The company is expected to gain momentum from four factors: recent recruitment of experienced representatives, increasing profits from junior rep training programs, new product launches and new revenue from the robotics and trauma pipeline.

The latter is expected to generate $11 million in the second half of 2017 and another $35 million in 2018.

Reading The Numbers

While Globus Medical has already rebounded (nearly 43 percent) from 2016 lows and rests at an all-time high, Leerink still sees room to inch higher. Analysts noted that the present valuation doesn't well reflect sales growth acceleration and above-average profitability.

Because Globus Medical’s stock and multiple valuation are strongly correlated with periods of re-accelerated growth, it appears that the company’s multiple could expand from a discount to a premium.

“We expect GMED is about to generate its strongest growth rebound yet over the next 12 to 14 months,” Newitter and Misra wrote.

Risks to the thesis include a slowdown in the spine market and a delay in the company’s robotics and trauma pipeline.

Globus Medical was trading up 3 percent at $30.71 at time of publication.

Latest Ratings for GMED

DateFirmActionFromTo
Jan 2019Morgan StanleyDowngradesOverweightEqual-Weight
Dec 2018Credit SuisseInitiates Coverage OnOutperform
Dec 2018Credit SuisseInitiates Coverage OnOutperform

View More Analyst Ratings for GMED
View the Latest Analyst Ratings

Posted-In: Leerink Swann Medtech Ravi Misra Richard NewitterAnalyst Color Upgrades Price Target Analyst Ratings

 

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