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Masimo (MASI -2%) slips to 2024 lows today despite projecting Q2 revs modestly ahead of consensus, underpinned by meaningfully improved market share, and noting that its order backlog is robust heading into Q3. Plenty of news surrounds MASI, which operates two distinct healthcare and non-healthcare segments. The company has been discussing separating its consumer business, i.e., the non-healthcare side of its operations, for the past few months.

Yesterday, management updated shareholders on the possible consumer business separation, remarking that the "Potential JV Partner" (the company seeking to purchase MASI's non-healthcare unit) was prepared to offer $850-950 mln for MASI's consumer business on a cash and debt free basis. The offer represents around 1.2x FY24 revs. Investors did not react strongly to the offer, keeping shares from moving significantly in any direction.

Today's muted response to MASI's uplifting Q2 outlook reflects an uneasy investor sentiment over the direction MASI will pursue.

• MASI's consumer business, selling audio products, was never well-received by investors, given it never complimented its core healthcare unit, which consists of hospital monitoring products. The company's non-healthcare revs have also struggled constantly over the past several quarters, typically sliding by a wide percentage yr/yr, offsetting the relative strength of its healthcare unit.
• As such, investors are likely itching for MASI to divest of its non-healthcare unit even though the potential suitor's price was not overly compelling. In fact, even at the high end, the price offered did not reach the $1.025 bln MASI paid for the consumer unit two years ago. With discretionary spending hampered by inflationary forces, MASI's consumer business faces intense headwinds over the near term, hence the relatively weak offer.
• Alongside the uncertainty surrounding M&A, there has been some turbulence from a major shareholder, Politan Capital, which has engaged in some back-and-forth with MASI over board nominees. MASI also released a presentation highlighting the risks of ceding control to Politan Capital. Meanwhile, MASI is in the middle of litigation with Apple (AAPL) over technology used in the Apple Watch, seeking licensing for its technology.

The main takeaway is that although MASI's Q2 preliminary revenue was encouraging, too many unknowns are swirling about, pushing aside this uplifting development. Still, if focusing purely on MASI's core healthcare business, the company is in good shape, boasting strong sensor orders across the U.S. and Europe in Q1, with this upward momentum trickling into Q2 and possibly Q3. The company also continues to gain market share, putting it in a solid position to extract future upside once the current clouds clear.