“Buy the dips” may be good advice, but it’s often tough to follow because meaningful pullbacks don’t usually happen without a reason, and that proximate cause is often scary in the short term. Such is the case with Philips (PHG) and its recall (and future litigation) of the DreamStation 1 sleep apnea machine. While there are billions in potential liability costs in play, it looks as though the market has overreacted to what should prove to be a manageable situation for the company.
Given that the market reaction would already seem to factor in a more-than-worst case scenario, this is a name for investors to consider, but only if they can be patient during the ups and downs of what is likely to be a multiyear resolution process. Long-term revenue and FCF growth of 3% and 6% can support a meaningfully higher price, but Philips management is likely back to square one when it comes to rebuilding its credibility with analysts and institutional investors.
Read more here:
Philips's DreamStation Nightmare Could Be A Longer-Term Opportunity
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