Yahoo Finance IHI’s Mid Caps on May 19: Medtronic’s Deal with Mazor Pressures Globus
What Really Put IHI in the Red: The Inside Story
IHI’s mid caps
On May 19, 2016, the mid-cap stocks of the iShares US Medical Devices ETF (IHI) declined by 0.3%, replicating the performance of the SPDR S&P 500 ETF (SPY), which also dropped by 0.3%.
IHI’s mid caps account for ~18.9% of the fund’s total portfolio. As of May 19, IHI held 16 large-cap stocks in its portfolio. Among them, nine stocks declined, and seven stocks advanced from the previous day’s close. On a YTD (year-to-date) basis, the fund’s mid-cap stocks have risen by 1.8% collectively.
So far in May, however, IHI’s mid caps have shed 0.1%, the SPDR S&P 500 ETF has dropped by 1%, and IHI on the whole has declined by 0.2%.
Medtronic’s deal with Mazor
On May 19, Globus Medical (GMED) was one of the top underperformers among the mid-cap stocks of IHI. Medtronic’s (MDT) deal with Mazor Robotics (MZOR) might put pressure on Globus Medical in the spine implant segment, which also has players like Stryker (SYK) and NuVasive (NUVA).
Medtronics will be investing ~$11.9 million to claim 4% of Mazor’s issued and outstanding share capital on a fully diluted basis in the newly issued securities. But Medtronic can buy additional securities in two more tranches, which will be subject to Mazor’s achievement of certain operational milestones.
Globus Medical closed at $23.28 on May 19 and was trading below its 20-day moving average. YTD, the stock has dropped by 16.3% and is trading at a 2016 forward PE (price-to-earnings) multiple of ~19.3x, with a book value of $7.84 per share. At its current price, the stock is trading at a price-to-book value of ~3.0x. Globus Medical has a weight of ~0.5% in IHI’s portfolio.
Analyst estimates and recommendations
The consensus analyst estimate for Globus Medical’s 12-month target price is ~$28.70. Of the analysts covering the stock, 11 have recommended a “buy,” and two have recommended a “sell.” None has recommended a “hold.”
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