Resilient ResMed, surging megaport: ASX ratings shakeup as AI and healthcare headwinds collide

The healthcare sector has faced significant headwinds recently, with performance dragged down by the offloading of surplus COVID-19 inventories, resulting in a modest 1.8% return over six months and trailing the S&P 500 by 9 percentage points. This sector-wide downturn has been exacerbated by macroeconomic pressures, inflation, and regulatory uncertainties, pushing the ASX 200 Health Care Index down around 34% year-to-date and 47% over the past 12 months, thereby creating potential valuation opportunities amid the challenges.

ResMed stands out as a resilient player within this turbulent environment, demonstrating robust growth with a 9.1% constant currency revenue increase over two years and a 15.2% compounded annual EPS growth over five years, supported by a remarkable 21.4 percentage point expansion in free cash flow margin to 31.7%. Despite a 26.3% stock price decline this year to a two-year low, brokers maintain a strong buy consensus with a 67% upside target, reflecting confidence in its durable demand driven by high-margin, recurring revenue from sleep apnoea devices and supplies.

However, concerns linger around the potential impact of GLP-1 weight loss drugs on ResMed’s respiratory device demand, injecting uncertainty into margins and investor expectations. Analysts like Mark Gardner from MPC Markets caution that while the large undiagnosed sleep apnoea market offers a long runway for growth, competition and new treatment options temper enthusiasm, resulting in a hold rating despite the company’s strong brand, scale, and patient ecosystem.

Beyond ResMed, other healthcare stocks such as CSL and Bio-Techne illustrate the sector’s mixed outlook; CSL’s shares have fallen sharply due to earnings disappointments and shaken investor confidence, yet it retains valuable global assets in plasma therapies and vaccines, suggesting buying opportunities at lower prices. Conversely, Bio-Techne’s smaller $1.21 billion revenue base, diminishing returns on capital, and a forward P/E of 23.3x have led analysts to classify it as risky, highlighting the valuation and growth challenges pervasive in the healthcare sector.

TechnologyOne (TNE) demonstrated resilience in its H1 FY26 results, meeting expectations despite foreign exchange headwinds that otherwise would have pushed its underlying performance ahead of consensus. Supported by a robust pipeline of 'Plus' leads, the company is well-positioned to achieve the upper range of its FY26 ARR and PBT guidance, prompting brokers to upgrade its rating to 'accumulate' with a $32.30 price target and an improved total shareholder return outlook of 18%. However, this optimism is tempered by ongoing uncertainties around AI-driven project execution and broader growth expectations within the technology sector, reflecting the market's cautious stance on how emerging AI complexities might impact delivery and scalability.

Goodman Group’s strategic capital deployment ahead of customer commitments underscores the fiercely competitive and capital-intensive nature of the metro data centre market, where securing power-enabled capacity is paramount. With work in progress set to surge from $14.5 billion in March 2026 to a record $18 billion by June 2026 and a power bank increased to 6.4GW, management highlights that industry-wide data centre capex demands likely outstrip global capital market capacity, favoring players like Goodman who have locked-in power, sites, and capital partners. This dynamic has fueled a significant share price re-rating driven by AI-related data centre projects, though elevated market expectations suggest a cautious risk-reward balance that currently supports profit-taking.

Megaport’s recent contract wins have led to substantial upward revisions in EBITDA and EPS forecasts—29% and 34% increases in EBITDA for FY27 and FY28 respectively, alongside EPS jumps of 29% and 55%—reflecting strong growth fueled by AI and network infrastructure demand. The company projects a two-year EBITDA payback on a US$101 million capital expenditure for these new contracts, with an anticipated EBITDA margin of 75% at maturity, underscoring the high profitability potential inherent in AI-driven network services and reinforcing investor confidence in the sector’s robust expansion trajectory.

Goodman Group stands out in the capital-intensive data centre sector by strategically deploying balance-sheet capital ahead of customer commitments to secure power-enabled metro data centre capacity, a move underscored by management’s observation that industry-wide data centre capex demands likely exceed global capital market funding capacity. This capital scarcity moat positions Goodman advantageously amid fierce competition for secured power, sites, and locked-in capital partners, reflecting a broader theme of constrained funding environments shaping investment strategies in infrastructure-heavy sectors.

While companies like Megaport are increasing capital expenditure to support new contracts—anticipating robust EBITDA growth with a projected two-year payback on US$101 million in capex and a 75% EBITDA margin at maturity—others such as New Hope Corporation and Elders Ltd face more nuanced challenges. New Hope maintains a hold rating despite strong production due to limited organic growth and ongoing capital commitments amid heightened geopolitical energy security concerns, whereas Elders grapples with elevated diesel prices that exacerbate cost pressures and contribute to a challenging outlook amid cyclical headwinds.

Elevated costs and rising capital expenditure expectations are weighing heavily on earnings forecasts and price targets for ASX Ltd and Endeavour Group. ASX’s FY27 cost guidance and FY28 capex plans significantly exceed consensus, prompting a downgrade of its price target to A$51.50 and signaling near-term headwinds from technology refresh investments. Meanwhile, Endeavour’s accelerated investments aimed at growth and cost reduction have increased execution risks and elevated balance sheet leverage, with the company navigating a still-challenging liquor market that tempers optimism until delivery milestones are met.