The market may be charging higher today, but the same cannot be said for the Pro Medicus Limited (ASX: PME) share price.
In afternoon trade, the health imaging technology company's shares are down 4% to $55.72.
This is an improvement on earlier in the day when the Pro Medicus share price was down 5.5% to $54.81.
Why is the Pro Medicus share price sinking?
The weakness in the Pro Medicus share price on Monday has been driven by a broker note out of Goldman Sachs.
According to the note, the broker has downgraded the company's shares to a neutral rating with a $55.60 price.
This means the Pro Medicus share price is now trading broadly in line with this price target.
Why did Goldman Sachs downgrade its shares?
The note reveals that Goldman Sachs made the move on valuation grounds. This follows a strong gain by Pro Medicus' shares over the last six months.
The broker said: "After a strong period of share price performance, PME's market cap is now challenging the perceived TAM. Whilst Visage is naturally expanding the market through an improved value proposition and higher price point, valuation is clearly elevated (71.7x NTM EV/EBITDA GSe), now trading +63% above 5-yr avg. on our estimates."
And while Goldman remains a big fan of the company, it doesn't believe the risk/reward on offer is sufficient.
"Whilst we continue to view the stock and the market opportunity favourably, we view risk-reward at these levels as more balanced, and thus we downgrade from Buy to Neutral, with our new 12m TP of A$55.60 implying 5% downside vs coverage median of +3%. Since we added the stock to our Buy list on Feb 17, 2021, the shares are +30.4% vs. the S&P/ASX 200 +7.7%," the broker explained.
Despite to today's decline, Pro Medicus' shares are still up 129% over the last 12 months.
