ResMed shares have fallen 26.2% in 2025 on FDA import rules and Philips' return. The stock trades at 22x earnings, below sector average. The FDA's final rule due this quarter is the next catalyst.
Alpha Score of 47 reflects weak overall profile with weak momentum, poor value, strong quality, moderate sentiment.
ResMed CDI (ASX:RMD) shares have fallen 26.2% since the start of 2025, wiping out roughly A$12 billion in market value. The selloff has pushed the stock to levels not seen since late 2023.
The trigger was a combination of factors. The U.S. Food and Drug Administration in February proposed new rules that could limit the market for imported sleep apnea devices, a move that directly threatens ResMed's supply chain. The company sources a significant portion of its CPAP machines and masks from manufacturing facilities in Singapore and Mexico. At the same time, competitor Philips resumed shipments of its DreamStation devices in the U.S. market after a multi-year recall, reclaiming shelf space that ResMed had captured during the disruption.
ResMed's revenue growth has slowed. The company reported fiscal second-quarter revenue of US$1.23 billion, up just 7% year-over-year, compared with 15% growth in the same period a year earlier. Gross margins narrowed to 55.8% from 57.2%, squeezed by higher freight costs and a stronger U.S. dollar against the Australian dollar, which reduces the value of ResMed's U.S.-denominated earnings when converted back to its reporting currency.
The bear case has limits. ResMed still holds roughly 70% of the global CPAP mask market and 50% of the device market, according to industry estimates. The FDA's proposed rule targets imported devices but exempts products made in the U.S. ResMed operates a manufacturing plant in Pennsylvania that could absorb some of the production shift, though scaling it would take 12 to 18 months. The company's AirSense 11 platform, launched in 2021, remains the most prescribed CPAP device in the U.S., and switching costs for patients and sleep clinics are high.
Valuation has compressed sharply. ResMed trades at 22 times forward earnings, down from a five-year average of 30 times. That multiple is below the median for the S&P 500 health-care equipment sector, which sits at 26 times. The discount reflects the regulatory overhang and the Philips re-entry, and it also assumes those risks fully materialize.
The next catalyst is the FDA's final rule, expected by the end of the third quarter. If the agency softens the import restrictions or extends the compliance timeline, the stock could recover ground quickly. If the rule stays as proposed, ResMed's Pennsylvania plant becomes the key variable. The current price embeds a worst-case scenario that may not come to pass.
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