Philips to Acquire US-Based Cardiac Care BioTelemetry for $2.8 Billion; Target Price €52 in Best Case

Dutch multinational conglomerate Philips announced to acquire a U.S.-based remote cardiac monitoring and diagnostic company BioTelemetry in a deal worth $2.8 billion in an attempt to scale up its remote care products business.

This deal is a strong fit with Philips’ strategy to transform the delivery of healthcare: combination of Philips’ leading patient monitoring position in the hospital with BioTelemetry’s leading cardiac diagnostics and monitoring position outside the hospital, the company said in the statement.

“We have always been very optimistic about connected care. With COVID-19 we have seen an acceleration of the demand and we think this acquisition fits perfectly in this era where remote patient monitoring will become ever more important,” Chief Executive Frans van Houten said.

BioTelemetry business is expected to deliver double-digit growth and improve its Adjusted EBITA margin to over 20% by 2025; acquisition will be sales growth and adjusted EBITA margin accretive for Philips in 2021, Philips added.

At the time of writing, Philips’ shares traded 2.07% higher at $44.94 on Friday; the stock is up over 5% so far this year.

Philips Stock Price Forecast

Ten equity analysts forecast the average price in 12 months at €48.84 with a high forecast of €52.00 and a low forecast of €39.40. The average price target represents a 10.98% increase from the last price of €44.01. All those ten analysts, eight rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of €50 with a high of €67 under a bull-case scenario and €34 under the worst-case scenario. The firm currently has an “Overweight” rating on the health technology company’s stock.

Several other analysts have also upgraded their stock outlook. Philips has been given a €51 price objective by investment analysts at Barclays. The brokerage presently has a “buy” rating on the stock. Kepler Capital Markets set a €44 price objective and gave the stock a “neutral” rating. Berenberg Bank set a €49.00 target price and gave the stock a “buy” rating. At last, UBS Group set a €50 target price and gave the stock a “buy” rating.

Analyst Comments

“Improving growth profile: New FY21-25 targets of +5-6% comparable sales growth imply an acceleration from the historical CAGR of +4%. Margin Recovery: Improvement in mix across the business drives higher operational leverage, while cost management initiatives in Personal Health and Diagnosis & Treatment helps limit pressures on EBITA margin,” said Michael Jungling, equity analyst at Morgan Stanley.

“Valuation: we believe a durable growth recovery in the capital equipment market and consumer demand for Personal Health, puts the company in an attractive risk-reward positioning relative to other companies in our sector over the next 12 months,” Jungling added.

Upside and Downside Risks

Risks to Upside: Product Launch Momentum: Momentum from on-going product launches and COVID-19 focused products drives topline growth and market share gains. Online retail strategy: Growth in online consumer retail could accelerate organic growth– highlighted by Morgan Stanley.

Risks to Downside: FX: EM currency volatility could be a source of headwinds on margins. COVID-19: pressure on consumer and hospital budgets following a potential COVID-19 driven recession.