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Morgan Stanley Upgrades Globus Medical, Expects 17% Upside

Morgan Stanley Upgrades Globus Medical, Expects 17% Upside
Globus Medical Q4 Earnings Preview
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Globus Medical's (GMED) CEO David Demski on Q4 2017 Results - Earnings Call Transcript (Seeking Alpha)

Globus Medical Inc (NASDAQ: GMED), a medical device company that's among the major players in spine robotic surgery technologies, saw its stock gain more than 70 percent in 2017, and one analyst projects more upside in 2018. 

The Analyst

Morgan Stanley's Jonathan Demchick upgraded Globus Medical from Equal-Weight to Overweight with a price target boosted from $32 to $48.

The Thesis

Globus Medical's past two years were characterized by "more subdued" organic growth, but the company is on the verge of "significant" top-line acceleration, Demchick said in the upgrade note. (See the analyst's track record here.) 

This will be led by the company's emerging technology portfolio in both robotics and trauma, Demchick said.

Globus' opportunity is undervalued by investors, and the Street isn't accounting for the impact from implant pull-through, the analyst said. 

While robot-assisted surgery technology isn't necessarily new in areas like urology, gynecology and general surgery, Globus Medical's focus on the spine is new, the analyst said.

The adoption of robot-assisted spinal surgery is likely to grow given the following key benefits, Demchick said: 

  • Screw accuracy.
  • Less radiation
  • Fewer revisions.
  • A faster learning curve.

The Street understands that a company like Intuitive Surgical, Inc. (NASDAQ: ISRG) can generate $2,000 per incremental procedure; Globus Medical can generate $8,000 to $9,000, the analyst said. 

Globus Medical's stock is its trading at a 15.3x EV/EBITDA model on the analyst's 2018 estimates, which is "only a modest premium" to its small- and mid-cap medtech peers, which trade at a 15x multiple. A larger premium is warranted given the company's growth prospects and peer-leading tax benefits, Demchick said. 

Price Action

Shares of Globus Medical hit a new 52-week high of $43.07 on Tuesday and were trading higher by 5.43 percent at the time of publication. 

Related Links:

Globus Medical Stands On The Brink Of Inflection; Leerink Upgrades

Intuitive Surgical Details New Study That 'Provides Compelling And Valuable Evidence' On The Advantages Of Robotic-Assisted Surgery

Latest Ratings for GMED

Feb 2018Morgan StanleyMaintainsOverweightOverweight
Jan 2018Morgan StanleyUpgradesEqual-WeightOverweight
Dec 2017Wells FargoUpgradesMarket PerformOutperform

View More Analyst Ratings for GMED
View the Latest Analyst Ratings

Posted-In: Jonathan Demchick Morgan StanleyAnalyst Color Upgrades Health Care Price Target Analyst Ratings General Best of Benzinga


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