ResMed (RMD): AI Bearish Signal Points to Put Options

ResMed is a global leader in digital health and cloud-connected medical devices focused on treating and managing chronic respiratory diseases. The company operates through two segments: Sleep and Breathing Health and Residential Care Software. Core products include 'CPAP', 'APAP', and 'bilevel' devices like the 'AirSense' and 'AirCurve' platforms, as well as 'masks', 'diagnostic products', and related 'accessories'. They also offer ventilation products such as 'Stellar' and 'Astral' ventilators. ResMed's Residential Care Software segment provides cloud-based solutions like 'Brightree', 'HEALTHCAREfirst', 'MatrixCare', and 'MEDIFOX DAN' to healthcare providers in residential care settings. ResMed differentiates itself by integrating digital health technologies, like 'AirView' and 'myAir', into its devices and software platforms, aiming to improve patient outcomes, create efficiencies for customers, and promote connected care.

RMD's technical outlook is decidedly bearish. The recent price action shows a clear downtrend, with the price plummeting from highs in early August to its current level. The stock is trading well below its 21-day EMA (262.66) and both the 50-day (271.17) and 200-day SMAs (251.61), confirming the strength of the downtrend. Momentum indicators reinforce this bearish sentiment; the MACD is deeply negative at -6.41, with the MACD histogram showing increasing negative divergence, indicating accelerated downward momentum. The RSI is at 27.03, signaling oversold conditions, but in a strong downtrend, oversold readings can persist for extended periods. The ADX at 32.25 suggests a strong trend is in place, further supporting the bearish case. Stochastics are also very low, but again, this is less meaningful in a strong downtrend. Bollinger Bands show the price near the lower band, suggesting continued weakness. Overall, the confluence of these indicators points to further potential downside for RMD over the next 1-3 months.

ResMed's management discussion reveals a positive operational trajectory. 'Net revenue' for the three months ended September 30, 2025, increased by 9% to $1,335.6 million from $1,224.5 million. The 'gross margin' also improved significantly, rising to 61.5% from 58.6% in the prior year, driven by 'manufacturing and logistics efficiencies and component cost improvements'. The company's 'Sleep and Breathing Health' segment saw a 10% increase in net revenue, while the 'Residential Care Software' business experienced a 6% increase. Net income increased by 12% to $348.5 million, resulting in diluted earnings per share of $2.37, up from $2.11. From a liquidity perspective, 'net cash provided by operating activities' was $457.3 million for the quarter, compared to $325.5 million in the prior year. The company repurchased $150.0 million of treasury stock. Overall, ResMed appears to be performing well with strong revenue growth, improved margins, and healthy cash flow from operations.

ResMed's Q4 fiscal year 2025 earnings call paints a moderately bullish picture, highlighting robust financial performance and strategic initiatives. CEO Michael Farrell reported a 'very strong quarter,' with 10% year-over-year revenue growth and 230 basis points of gross margin expansion. The company's strong free cash flow of $1.7 billion allows for both business investments and shareholder returns, including an increased quarterly dividend and expanded share repurchase activity targeting approximately $150 million per quarter. ResMed is focused on operational excellence, demonstrated by the gross margin expansion and plans to further evolve their global manufacturing footprint. Investments in R&D and SG&A, particularly in direct-to-consumer marketing and physician education, aim to drive demand and improve patient outcomes. The acquisition of VirtuOx is part of a broader strategy to expand diagnostic capabilities and streamline patient access to therapy. Management is closely monitoring the competitive bidding program and advocating for policies that protect patient access to care. CFO Brett Sandercock anticipates gross margins to be in the range of 61% to 63% in fiscal year 2026 and SG&A expenses as a percentage of revenue to be in the range of 19% to 20%.

ResMed's financial performance reveals a generally positive trend with some areas of concern. Revenue has increased from $1,162.8M in Q2 2024 to $1,335.6M in Q1 2026, showcasing consistent growth. The gross profit ratio has remained relatively stable, fluctuating between 0.556 and 0.615, indicating consistent profitability on sales. Operating cash flow has been positive throughout the period, with the most recent quarter showing $457.3M, suggesting healthy cash generation from core operations. However, total debt decreased from $1,391.4M in Q2 2024 to $846.4M in Q1 2026, which is a positive sign for solvency and financial stability. Overall, ResMed demonstrates a solid financial position with revenue growth, positive cash flow, and decreasing debt. The stable gross profit ratio further supports the company's operational efficiency and profitability.

The company presents a moderately bullish investment profile based on its financial data. Revenue has shown positive growth, indicating increasing market demand or successful market penetration. The gross margin is healthy, suggesting efficient cost management in production or service delivery. A strong return on equity (ROE) signals effective utilization of shareholder investments to generate profit. The price-to-earnings (P/E) ratio suggests the stock is trading at a premium, but this could be justified by the company's growth prospects and profitability. A manageable debt-to-equity ratio indicates a reasonable level of financial leverage. The current ratio, being greater than 1, demonstrates the company's ability to cover short-term liabilities with its current assets, further solidifying its financial health. Overall, the combination of revenue growth, healthy profitability metrics, and a solid balance sheet makes the company an attractive investment for the next 12 months, although the elevated P/E ratio warrants careful monitoring.