Pro Medicus shares soar after Citi upgrades to 'buy'
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The news: Pro Medicus shares climbed in early trade after Citi upgraded its rating and target price on the medical imaging company.
The numbers: Shares were up 6.4% to $317.88 at 10:50am AEST, taking 12-month gains to 85.5%.
Citi upgraded its rating on Pro Medicus from 'sell' to 'buy' and hiked its target price from $220 to $350.
The context: Analyst Laura Sutcliffe said Pro Medicus holds an earnings multiple "well north of 100x" but compounding effects of long contracts, a sticky customer base and compelling efficiency benefits warrant forecasting revenue growth of 20% beyond five years.
Sutcliffe also noted that AI has the potential to support future growth, with the company recently disclosing a licensing agreement to commercialise a breast cancer detection algorithm it co-created. Pro Medicus is also positioning itself as a platform with which third-party AI solution creators can integrate, she said.
What they said: "We can see how this is a win-win", Sutcliffe said.
"Pro Medicus gets expanded functionality by proxy and AI developers get ready customers and supporting infrastructure. Isolating the opportunity numerically is difficult, but we can see how this works both as a revenue lever (with very high EBIT margin) and to deepen the company's moat."
The source: Citi research
