Masimo Corporation (MASI): A Bull Case Theory

Core Thesis - Masimo Corporation is viewed positively due to its strong position in medical technology, particularly its Signal Extraction Technology (SET®) pulse oximetry platform, which is widely adopted in hospitals globally [2][4] Business Model - The company operates a razor-and-blade model where hardware placements lead to recurring revenues from consumables, ensuring high visibility and stability in revenue streams [2] - Consumables account for over 50% of revenues, which helps maintain predictable margins and reinforces customer loyalty [3] Competitive Advantage - Masimo's competitive moat is supported by proprietary intellectual property, regulatory approvals, and long-term contracts with hospitals, creating a durable competitive advantage [3] - The company has extended its moat through the introduction of adjacent non-invasive monitoring parameters [3] Investor Sentiment - Despite the strong fundamentals, investor sentiment remains cautious due to historical skepticism regarding management's capital allocation and diversification efforts, such as the Sound United acquisition [4] - Activist involvement and the divestiture of Sound United have refocused the business on its core healthcare franchise, yet many investors still undervalue the company relative to its intrinsic strength [4] Risks and Challenges - Potential pricing pressure from competitors like Medtronic and group purchasing organizations could impact Masimo's premium market position [5] - Competition from Big Tech, particularly Apple, poses a long-term substitution risk [5] - Litigation outcomes and regulatory challenges add further uncertainty to the business environment [5] Investment Opportunity - Despite the risks, Masimo presents a compelling investment opportunity due to its recurring revenue model, strong intellectual property, and a refocused strategy that contrasts with prevailing investor skepticism [5]