ResMed defies sector slump with oura deal, but investors remain wary amid ASX health woes
The gist
ResMed is bucking the ASX healthcare slump—posting robust growth, inking a game-changing Oura deal, and eyeing a 39% upside—even as investors keep one hand on the panic button.
What to know
- ResMed delivered a resilient Q1 with 9.1% average constant currency growth over two years despite the S&P/ASX 200 Health Care Index hitting an eight-year low.
- A new partnership with Oura brings wearable tech into clinical sleep care, expanding access to sleep apnea diagnosis and fueling high-margin, cloud-based revenues.
- Despite a 20% stock slide in 90 days, analysts see shares undervalued by 39%—but reimbursement risks and fierce competition still cast a shadow.
ResMed’s Resilience Amid Turmoil
While the broader ASX healthcare sector faces currency shocks, labor cost spikes, and post-pandemic inventory woes, ResMed stands out for its ability to consistently grow despite these macroeconomic headwinds.
While the broader ASX healthcare sector faces currency shocks, labor cost spikes, and post-pandemic inventory woes, ResMed stands out for its ability to consistently grow despite these macroeconomic headwinds.
Sector Headwinds Intensify
Currency volatility, escalating labor expenses, and lingering pandemic inventory issues have driven the ASX Health Care Index to an eight-year low, exposing the fragility of even the largest healthcare players.
The ASX healthcare sector is grappling with a confluence of headwinds that have significantly dampened investor sentiment and market performance. Currency fluctuations, rising labor costs, and looming uncertainties around potential US tariffs have collectively pressured companies with substantial offshore operations, including ResMed, whose earnings translation remains vulnerable to these currency movements. This challenging environment has contributed to the S&P/ASX 200 Health Care Index (ASX: XHJ) plummeting to an eight-year low, with many healthcare shares trading near their 52-week lows, underscoring the pervasive market unease.
Adding to these structural pressures, the healthcare sector has also been weighed down by the residual effects of offloading surplus COVID-19 inventories throughout 2023 and 2024, which curtailed overall demand and led to a modest 1.8% industry return over the past six months—trailing the broader S&P 500 by a notable nine percentage points. Despite these sector-wide challenges, ResMed has demonstrated remarkable resilience, achieving an average constant currency growth of 9.1% over the past two years, signaling its capacity to navigate macroeconomic headwinds such as currency risks and rising costs while expanding its global footprint.
Wearables Meet Clinical Care
ResMed’s Oura partnership signals a strategic leap into digital health, merging consumer wearables with clinical-grade sleep apnea care to strengthen its recurring revenue and competitive edge.
ResMed's strategic partnership with Oura exemplifies a forward-thinking integration of consumer wearable technology with clinical sleep care, connecting Oura Ring users in the US to ResMed’s sleep education tools and potential obstructive sleep apnea care pathways. This collaboration not only broadens access from simple at-home sleep tracking to medically supervised diagnosis and treatment but also reinforces ResMed’s position in expanding sleep apnea care accessibility through innovative digital health solutions.
By accelerating adoption of home-based, cloud-connected therapy platforms such as Brightree and AirView, the Oura partnership bolsters ResMed’s growth prospects through enhanced recurring high-margin revenue streams and improved user retention. Coupled with ongoing AI-driven product innovations—including new CPAP devices and mask interfaces—this integration strengthens ResMed’s competitive differentiation and supports premium pricing power, ultimately contributing to sustained revenue and margin expansion.
While the Oura collaboration aligns with ResMed’s broader push toward earlier, technology-enabled screening for sleep apnea, it does not materially shift near-term growth catalysts, which remain anchored in reimbursement stability and competitive pressures from alternative therapies. Nonetheless, ResMed’s management actively emphasizes this partnership’s strategic role within its digital health narrative, as evidenced by planned presentations at the 46th Annual William Blair Growth Stock Conference, underscoring its importance in the company’s long-term growth story.
Valuation Versus Uncertainty
Despite analysts projecting nearly 40% upside, investor caution prevails as reimbursement risks and rising competition threaten to undermine ResMed’s ambitious growth narrative.
Investor sentiment toward ResMed remains cautiously optimistic despite the stock trading nearly 20% lower over the past 90 days and hovering about 30% below analyst price targets. This discount persists even as the company’s strategic partnership with Oura aims to expand sleep apnea care access by integrating consumer wearables with clinical sleep pathways, potentially broadening ResMed’s market funnel from at-home tracking to medically supervised diagnosis and treatment. However, near-term investor focus continues to center on reimbursement stability and competitive pressures from alternative therapies, which temper enthusiasm amid ongoing sector headwinds.
Valuation analyses underscore a compelling upside case for ResMed, with a fair value estimate of $288.21 per share implying a roughly 39% premium to the last close of $207.78. This bullish outlook is driven by anticipated growth in cloud-connected therapy platforms and AI-enabled product innovation, projecting revenues of $6.7 billion and earnings of $1.9 billion by 2029. Yet, this positive narrative hinges on assumptions about sustained revenue growth and profitability that could be challenged by tightening reimbursement policies and intensifying competition, highlighting the nuanced risk-reward calculus investors must weigh.