The Fisher & Paykel Healthcare Corp Ltd (ASX:FPH) share price is up 50% in 2020. Can it go even higher?
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The Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) share price has been a very strong performer in 2020.
Since the start of the year, the medical device company’s shares have risen a remarkable 50%.
Why is the Fisher & Paykel Healthcare share price up 50% this year?
Investors have been scrambling to buy Fisher & Paykel Healthcare’s shares this year after the COVID-19 pandemic led to a surge in its sales and profits.
Yesterday, the company released its half year results and revealed a 59% increase in operating revenue to NZ$910.2 million and an 86% jump in net profit after tax to NZ$225.5 million.
This was driven by strong demand for its hospital hardware, particularly its Optiflow and Airvo systems. Traditionally, this nasal high flow therapy is used in clinical practices but has shifted as a front-line treatment for COVID-19 patients in hospitals.
Management appears optimistic that the second half will be strong and has lifted its expectations for FY 2021.
Based on current assumptions, it estimates that full year revenue could come in at NZ$1.72 billion and net profit after tax would be between NZ$400 million to NZ$415 million. The latter is up from its previous expectation for profit after tax of NZ$365 million to NZ$385 million.
Is it too late to buy Fisher & Paykel Healthcare shares?
According to one leading broker, it’s not too late to make an investment in Fisher & Paykel Healthcare’s shares.
This morning analysts at Goldman Sachs retained their buy rating and bumped their price target higher to $37.60.
The broker notes that high-flow therapy continues to build momentum and it sees an attractive penetration runway ahead.
Goldman commented: “High-flow penetration of conventional oxygen therapy probably sits between 10-20%, and we see limited reasons why 50%+ is not possible over the mid/long-term. Clinical and regulatory feedback have been increasingly supportive, and we expect the forward penetration trajectory to have steepened through recent periods.”
“FPH reiterated today that Optiflow and Airvo are ‘nowhere near’ market saturation. FPH upgraded FY21 guidance for the second time today (after four upgrades in FY20). With near-term momentum accelerating rather than slowing, we expect at least one further upgrade in the remainder of the year and upgrade our FY21 earnings estimate by 11% to $426m (+5% above mid-point of range),” it added.
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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.