PHG - Philips falls as UBS downgrades to Sell citing impact of product recall

The ADRs of Koninklijke Philips (NYSE:PHG) have lost ~10% in the pre-market Thursday after UBS downgraded the Dutch medical device maker to Sell from Neutral citing multiple overhangs related to the recall of certain respiratory care devices. The analysts see a negative risk reward setup ahead of the upcoming Sleep device testing data linked to product recall. Citing their new work on a connected lawsuit, they also flag concerns over a potential for respiratory injury claims. In addition, UBS rules out a resolution to the issue in 2023 and expects a FDA response to inspectional observations and the outcome of a DOJ subpoena to act as overhangs on shares. Citing margin concerns, the firm sets its 2022 adjusted EBITA projections for Philips (PHG) at 6% below the consensus and expects the downgrade cycle to continue. However, Philips (PHG) shares look cheap with nearly ~40% YTD decline and trading at 12x of company

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Philips falls as UBS downgrades to Sell citing impact of product recall