Morgan Stanley Downgrades STJ To Underweight

Morgan Stanley reports today that increasing risks to revenue outlook amid a softening CRM market drive its downgrade on shares of St. Jude Medical, Inc. (NYSE: STJ) to UW.

“St. Jude's reliance on the cardiac rhythm management (CRM) market (nearly 60% of 2010e sales) has long been a key investor concern on the stock,” Morgan Stanley writes.

“Market growth concerns may play out in 2011-12, when we expect to see a negative inflection in St. Jude's CRM growth, driven by: 1) slower unit growth as the replacement cycle tapers off, 2) increased pricing pressure from hospitals, and 3) reduced opportunities for share gain as Boston and Medtronic launch new products.”

“We expect CRM market growth to be flat over 2011-13 vs. management's view of 3% growth,” Morgan Stanley adds.

St. Jude Medical currently trades at $42.49.