Masimo Corp. is best known for making hospital monitoring and automation equipment, an industry with a total addressable market (TAM) around $9 billion.
Last week, the Irvine-based medical device maker (Nasdaq: MASI) unveiled its strategy to expand its market size about twentyfold to $171 billion by making consumer electronic health devices, ranging from headphones to watches.
“We’re entering massive new markets,” Chief Financial Officer Micah Young said at the company’s annual investor meeting on Dec. 13.
“You’re starting to see how everything is coming together, the vision we have.”
Busy Year
The long anticipated annual event came after Masimo last February surprised investors with its largest ever investment by buying Sound United, a consumer-oriented company best known for making high-quality speakers and headphones under brands like Boston Acoustics, Polk, and Bowers and Wilkins.
The acquisition caused Masimo’s market cap to fall $5.2 billion in one day, and also attracted activist shareholder Politan Capital Management, a New York-based firm that has been successful in other battles that resulted in management shake-ups.
Masimo defended its entry into consumer devices by saying other tech companies “have compromised consumer experiences by offering health information that they aren’t qualified to offer.
“These brands have not elevated the category because they are offering mass-market functionality that can’t be trusted to guide a healthier life,” the company said during its investor’s day presentation.
7%-9% CAGR Forecast
At the Dec. 13 event, the company forecast 2023 sales may climb about 6% to 8% in constant currency to $2.33 billion to $2.4 billion; analysts on average expected $2.36 billion. It’s projecting adjusted profit may be lower next year, $4.25 to $4.45 a share; analysts are expected $4.45 this year and $4.43 in 2023.
The company said its compounded annual growth rate will be 7% to 9% until 2028.
Investors liked the story, pushing the stock up 4.9% last week on the day of the presentation. The share price was $142 at press time, with a $7.5 billion market cap.Â
“We have an amazing trajectory,” founder, Chairman and Chief Executive Joe Kiani told the investors.
He defended the purchase of Sound United, saying the price was reasonable and it helps the company expand into the consumer space.
“It is risky, but when you take risks, you improve your chances of survival. These are calculated risks,” he said.ÂÂ
“Masimo’s unique combination of patient monitoring expertise and consumer product development capabilities position us to truly help people improve their lives and earn the right to win in these attractive new markets, while also extending our lead in our existing markets.”
Consumer Focus
The company revealed that it will focus on providing hospital quality products to consumers in four areas:
n Telemonitoring: Masimo says patients at home can be monitored for items like hypertension, fever or postoperative care. It’s estimated to be a $20 billion opportunity.
Masimo will have “the largest continuous monitoring cloud technology in the world.”
It’s using Sound United’s platform, called the Home Entertainment Operating System, also known as HEOS, to create a “health hub.” The company says the Masimo Health secure cloud will be made available to users of over 4 million HEOS-enabled Sound United devices like Denon, Marantz, and Definitive Technology.
“As users move throughout the home, and even beyond it, key health data, including
oxygen saturation, pulse rate, respiration rate, hydration, and temperature, are available continuously, allowing users to track their health and wellness,” the company said.
“The platform will also support the hosting of telehealth sessions from home, with data transfer to clinicians streamlined to assist them in providing the most comprehensive remote care possible.”
n Wearables: 133 million Americans have at least one chronic disease that could benefit from tech wearables, which is potentially a $50 billion TAM. Masimo has unveiled its first watch, the W1 (see page 12 for more).
“Significant portion of alerts from existing watches are false alarms,” the company said.
Other products now available for consumers include Sleep, a wearable seven-night sleep system; the MightySat, a fingertip device to measure vital signs; and the Radius T, a wireless wearable continuous thermometer.
n Hearables: The company’s products for the ears will adapt acoustic sound to a personalized profile, saying headphones are a $55 billion TAM while hearing enhancement is another $30 billion.
n Baby monitors: Masimo says 3,400 infants die annually from sudden infant death syndrome (SIDS) in the U.S., and an infant gets seven to 12 colds or viral infections per year. The market size, with 130 million babies born annually, is $1.5 billion in monitors growing at 9% to 15% annually.
Apple Lawsuits
Masimo continues in its litigation with Apple Inc., the world’s most valuable publicly traded company with a $2.3 trillion market cap, alleging intellectual property theft.
Kiani told attendees that the differences between Masimo’s W1 and Apple’s watch “is greater than I expected.”
“The future looks fantastic,” he said.
