ResMed Inc (ASX: RMD) shares have been on a strong run this month.
Since the start of January, the sleep treatment company's shares have risen 10.5%.
A good portion of this gain came last week after ResMed impressed the market with its second quarter update.
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Can ResMed shares keep rising?
The good news for investors is that the team at Goldman Sachs believes the company's shares can still rise materially from current levels.
According to a note, the broker has responded to ResMed's quarterly update by reiterating its buy rating and lifting its price target to $33.50.
Based on the current ResMed share price of $28.45, this implies potential upside of 18% for investors over the next 12 months.
Commenting on the quarter, Goldman said:
RMD reported solid +4-6% earnings beats at 2Q24 as US device growth recovered back to/above market growth, whilst the pace of gross margin recovery exceeded our expectations.
Goldman also addressed concerns over gross margins, competitive dynamics, and the impact of GLP-1s such as Ozempic. It said:
Taking a higher-level view beyond the quarter, the three primary debates that have dominated investor focus over the last 12+ months have been: 1) the potential impact of further GLP-1 adoption on CPAP demand/adherence; 2) the shape of GM recovery, and if/when RMD can return to pre-Covid profitability; and 3) competitive dynamics amongst incumbents, particularly the magnitude of impact if/when PHIA re-enters the US CPAP markets. On all three points we believe there is sufficient positivity to continue to see asymmetric upside risk at current valuations and, overall, we saw nothing today to change our fundamental views.
Overall, the broker sees ResMed as a top option for investors right now despite its strong gains this month.
