Piper Sandler’s Top Technical Stock Picks: 20 Best Stocks

12. Masimo Corporation (NASDAQ:MASI)

Number of Hedge Fund Holders In Q2 2024: 35

Masimo Corporation (NASDAQ:MASI) is a medical devices company that primarily makes and sells monitoring devices. Its products enable healthcare providers to monitor patient oxygen levels, hemoglobin, brain function, and other body functions. Masimo Corporation (NASDAQ:MASI)’s business benefits from growth and recurring aspects as the firm sells sensor housings and sensors. These enable it to simultaneously target new customers with its housings and then continue earning recurring revenue via the sensors. Additionally, due to the hardware-centric nature of its business, Masimo Corporation (NASDAQ:MASI) also has to ensure that it keeps manufacturing costs low. On this front, the firm is opening a new plant in Malaysia, and the higher the volume of its shipments, the greater its economies of scale and cost control. Additionally, the firm has also halted Apple’s latest Apple Watch sales due to patent disputes, and provided that it launches its own medical monitoring watch, Masimo Corporation (NASDAQ:MASI)’s stock could see tailwinds. Its stock soared by 19% in September after management changes, and the firm is also planning to spin out its consumer business which could generate more positive sentiment.

Masimo Corporation (NASDAQ:MASI)’s management shared details about cost control during the Q2 2024 earnings call:

“For the second quarter, our consolidated non-GAAP gross margin was 54%, which included gross margins of 62.5% for healthcare and 35% for non-healthcare. Healthcare gross margins improved 240 basis points year over year and rose 20 basis points sequentially, which is attributable to the relocation of sensor manufacturing to Malaysia combined with increased operational efficiencies and a favorable mixed benefit from higher consumable sales.

Our progress on this front gives us confidence in achieving our long-term goal of 30% operating margins for the healthcare business in five years. For our consolidated business, non-GAAP operating profit was $73 million. Our operating margin of 15% improved sequentially from the first quarter but declined modestly versus last year due to the return of performance-based compensation to normalized levels in 2024. Excluding the impact of performance-based compensation, our operating expenses decreased 4% versus the prior year period due to cost reduction initiatives. Even with the return of performance-based compensation, we delivered 13% earnings growth to achieve non-GAAP earnings per share of $0.86 for the second quarter.”