On Monday, BTIG has changed its stance on Globus Medical (NYSE:GMED), raising the stock from Neutral to Buy with a new price target of $60.00. The firm's decision reflects a positive outlook on the company's valuation and potential for growth in the coming year.
The analyst at BTIG provided insight into the rationale behind the upgrade, citing a blend of P/E and EV/EBITDA metrics. The firm acknowledges past skepticism regarding Globus Medical's acquisition of NuVasive (NASDAQ:NUVA), but now sees the current valuation as an opportunity where the potential rewards outweigh the risks. The analyst indicates that, with the integration period behind them, management has had sufficient time to mitigate deal risks.
Globus Medical is entering the fiscal year 2024 in a robust spine market, poised to leverage cost synergies. Management has factored in significant sales dissynergies, which the analyst believes leads to conservative growth guidance of approximately 2.5% year-over-year. This conservative estimate, paired with potential improvements in NuVasive's cost profile, suggests there could be upside potential to earnings per share.
The analyst notes that while it may be unlikely for Globus Medical to return to its previous mid-30% adjusted EBITDA margins, there is an expectation of a positive margin trajectory over the next 12 to 18 months as the company moves past the trough margins of fiscal year 2023.
This upgrade by BTIG signals a turning point in perception for Globus Medical, as the company looks to capitalize on strategic initiatives and market conditions to drive growth and profitability.
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