Stifel downgrades Medtronic, citing delayed progress

Investing.com - On Tuesday, analysts at Stifel downgraded Medtronic PLC (NYSE: MDT) from "Buy" to "Hold" and reduced the price target from $100 to $85.

While acknowledging the positive changes implemented by CEO Geoff Martha since 2020, the analysts express concerns over the company's slow pace in achieving significant growth and market share improvements.

Stifel's decision to downgrade Medtronic stems from a combination of factors. Key growth initiatives, such as the HUGO surgical robotic system and renal denervation technology, are taking longer to materialize than anticipated, hampering significant growth acceleration.

Additionally, various Medtronic divisions face stiff competition, limiting growth potential. The timing of post-COVID margin recovery also remains uncertain, making it difficult to foresee accelerated growth or meaningful margin expansion.

Given these challenges, Stifel believes Medtronic’s mid-single-digit organic revenue growth and high-single-digit EPS growth outlook do not justify a "Buy" rating.

In the Medical Surgical division, despite a recovery in 2024 with a growth rate of 5.2%, the outlook for 2025 remains challenging.

The HUGO surgical robotic system is not fully market-ready and lacks several key features and US approval, putting pressure on the division's growth.

In the Diabetes segment, the recent partnership with Abbott is a positive development, but the integration of Libre sensors with Medtronic’s pumps is at least a year away, limiting immediate competitiveness.

The NeuroScience division, while showing promise with steady growth and market leadership, continues to face challenges in fully recovering from the pandemic.

The Structural Heart&Aortic division is facing slowing market growth and increased competition, making it difficult to maintain its edge against emerging technologies from competitors.

In the Renal Denervation segment, despite recent approval, the technology is still awaiting CMS reimbursement, limiting immediate commercial uptake.

Finally, the Cardiac Rhythm&Heart Failure division is experiencing growth below that of its peers, with competitive pressures from Abbott's leadless pacemaker technology further complicating the prospects.

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