On Tuesday, Mizuho (NYSE:MFG) Securities adjusted its outlook on shares of Medtronic , Inc. (NYSE:NYSE:MDT), a global leader in medical technology, by increasing the price target on the company's shares to $100 from $98, while maintaining an Outperform rating.
According to InvestingPro data, the stock currently trades near its 52-week low of $75.96, with analyst targets ranging from $82 to $112. InvestingPro's Fair Value analysis suggests the stock is currently undervalued. The revision reflects the firm's positive view on Medtronic's recent advancements, particularly in the renal denervation (RDN) space with the Symplicity SPYRAL system.
The analyst from Mizuho highlighted the significance of the Centers for Medicare & Medicaid Services (CMS) granting transitional pass-through (TPT) payment status for the Symplicity Spyral RDN catheter as of November 1, 2024, which will take effect starting January 1, 2025. This CMS decision is expected to provide Medtronic with coverage for approximately 45% of the Medicare fee-for-service (FFS) patient population.
The target patient population for the Symplicity SPYRAL RDN system is estimated at around 2 million worldwide, who have blood pressure over 150mmHg despite being on three or more medications. This characterizes them as at significant risk and shows that drugs alone are insufficient. The analyst estimates that roughly 1 million of these patients are in the United States.
With the TPT coverage, about 225,000 Medicare FFS patients could be eligible for the Symplicity SPYRAL RDN treatment from January 1, 2025. Given the average selling price (ASP) of approximately $16,000 per treatment as quoted in CMS documents, the U.S. total addressable market (TAM) is calculated to be around $3.5 billion initially, with the potential to expand to $15 billion with additional coverage.
The analyst also noted Medtronic's ongoing investment in its product pipeline through sales, general, administrative (SG&A) expenses, and research and development (R&D) in fiscal year 2025 (FY25), expecting roughly flat adjusted operating margins (OM) compared to FY24. However, the firm anticipates that successful product launches could provide Medtronic with leverage flexibility and the potential to exceed current Street estimates by FY26.
In other recent news, Medtronic has seen a series of developments. The company's second-quarter financial performance surpassed expectations, with revenues reaching $8.40 billion and earnings per share at $1.26.
Following these results, Medtronic raised its full-year 2025 revenue and EPS guidance. Barclays (LON:BARC) maintained its Overweight rating on Medtronic and increased its price target to $109, citing expectations of accelerating earnings growth in the latter half of fiscal year 2025. However, Baird lowered its price target from $96 to $93 due to growth concerns, while maintaining a Neutral rating.
On the analyst front, RBC (TSX:RY) Capital Markets upgraded Medtronic's rating from Sector Perform to Outperform, while Goldman Sachs (NYSE:GS) maintained a Sell rating. Meanwhile, UBS raised its price target for Medtronic to $93, citing the company's consistent mid-single-digit revenue growth.
In terms of product developments, Medtronic has received FDA clearance for its innovative Smart MDI system, which includes the InPen™ app and the Simplera™ continuous glucose monitor, designed to aid in diabetes management. These are recent developments in Medtronic's journey.
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