Masimo shares tumbled 40% in morning trading.
The transaction is expected to be immediately accretive to Masimo’s non-GAAP EPS upon closing, which is expected near the middle of 2022.
However, Wall Street is not convinced. Sounding caution over the acquisition, Piper Sandler has downgraded the stock to Neutral from Overweight. While there are some potential financial and strategic benefits in the deal, “we’re simply left in limbo in the near-term with too many questions/unknowns regarding the fit and acquisition rationale,” the firm wrote. The analysts highlighted the need for more insights into the long-term prospects of the transaction.
Meanwhile, Needham, with a Hold rating on Masimo (MASI), noted: “We do not expect a positive reception from investors despite the EPS accretion and expect the accretion to be offset (or even more than offset) by multiple contraction.” While investors could appreciate the benefits of the deal in the long-term “that won’t happen overnight,” the analysts added.
Commenting on the deal, Stifel said: “With lingering questions surrounding transaction strategy/ integration, we suspect the acquisition will take time for investors to fully digest.”