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Why Goldman Sachs sees 13% upside for the ResMed share price

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The ResMed Inc (ASX: RMD) share price was on form on Friday.

The sleep treatment focused medical device company’s shares rose almost 3% to $30.45.

Can the ResMed share price keep rising?

The good news for investors is that one leading broker still sees plenty of room for the ResMed share price to keep rising.

According to a recent note out of Goldman Sachs, its analysts have a buy rating and $34.40 price target on its shares.

This implies potential upside of 13% for investors over the next 12 months.

What did the broker say?

Goldman notes that ResMed has announced plans to acquire Medifox Dan for US$1 billion.

It is an out-of-hospital software provider based in Germany which generated revenue of US$83 million and EBITDA of US$35 million in calendar year 2021.

Goldman appeared pleased with the deal. It commented:

The acquisition goes some way to answering a long-held question the market has had around when/how the company would attempt to replicate its SaaS strategy outside of the US market.

What else is the broker saying?

Its analysts also highlight that the ResMed share price has been underperforming in FY 2022 due to concerns over supply chain headwinds. This has stopped the company from taking full advantage of a major product recall from rival Philips.

However, Goldman feels the market is overreacting and expects elevated demand to stick around long enough for ResMed to benefit. It also sees a backlog of patients waiting to be diagnosed as a potential upside risk to estimates.

Its analysts explained:

We believe the elevation in demand could persist beyond the time it takes for component shortages to improve (via both external and internal factors) and, as such, the YTD underperformance of the shares may be over-capitalising relatively short-term headwinds.

We believe the backlog of new patients may add upside to our estimates if there is a material realisation of incremental devices/masks sales to new patients in FY23/24 (supply chain pressures permitting). The return of PHIA to the market may actually help in this regard, as the company supplies critical diagnosis equipment.

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