Masimo stock surged Wednesday after a U.S. judge ruled Apple infringed on two patents protecting Masimo's blood-oxygen-reading technology.
Masimo makes pulse oximeters, which measure oxygen level in the blood. This is an easy way to see how well oxygen is being sent to the extremities. Apple first introduced the pulse oximeter sensor in its watches in 2020 and still uses the light-based technology in the current iterations.
The U.S. International Trade Commission now will consider whether to implement an import ban on the Apple Watch. Needham analyst Mike Matson says it's more likely Apple will opt to pay Masimo royalties in a settlement agreement.
"We estimate that even a modest royalty of $1-$2 per watch could add $60 million-$120 million to Masimo's annual revenue and 82 cents-$1.64 to its annual (earnings per share)," he said in a note to clients. He added this could be worth $25-$50 per share of Masimo stock.
On the stock market today, Masimo stock jumped 2.2% to close at 156.76, paring a bigger premarket pop. Apple stock rose 2.1%, ending the regular session at 133.49.
Masimo Stock: Waging A Bigger Patent Battle
Masimo initially filed the complaint against Apple in June 2021, requesting the International Trade Commission ban imports of the Apple Watch into the U.S. from China, Matson said. The ban could go into effect this May. President Joe Biden now has 60 days to disapprove the decision. If Apple loses, the tech giant could appeal.
The Masimo patents don't expire until 2028, Matson said. Meanwhile, Apple is expected to sell about 59 million watches in 2023, up from 50 million last year and 40 million in 2021.
Masimo is also suing Apple in the federal court system, saying the tech giant infringed on 10 of its patents. The medical devices maker also says Apple poached several of its executives in an effort to avoid a royalty or cash deal with Masimo, Matson said.
In an emailed statement to Investor's Business Daily, Apple said it's seeking a full review by the International Trade Commission.
"At Apple, our teams work tirelessly to create products and services that empower users with industry-leading health, wellness and safety features," the company said. "Masimo is attempting to take advantage of these many innovations by introducing a device that copies Apple Watch and infringes on our intellectual property, while also trying to eliminate competition from the market."
Masimo Has A 'Strong Patent Portfolio'
Matson kept his buy rating on Masimo stock. He noted Masimo has won patent suits against big companies like Medtronic and Philips.
"We believe Masimo has built a strong patent portfolio," he said. "However, we expect the lawsuits to take many years to play out."
Masimo stock has a Composite Rating of 83, according to IBD Digital. This puts shares in the top 17% of all stocks in terms of fundamental and technical measures.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
