UPDATE 1-RESEARCH ALERT-Citigroup cuts Somanetics to hold

(Adds details, share movement)

July 18 (Reuters) - Citigroup downgraded Somanetics Corp (SMTS.O: Quote, Profile, Research, Stock Buzz) to "hold" from "buy," saying it saw little reason for shares of the medical device maker to rise higher in the near term.

Shares of Troy, Michigan-based Somanetics were down more than 11 percent at $20.67 in morning trade on Nasdaq.

But, the brokerage raised its target price on the stock to $25 from $24 due to higher peer multiples.

Cardiac surgery, which remains the lion's share of revenues, has slowed to mid-single digit growth and this puts pressure on hardware sales and improved INVOS utilization, which are difficult to predict accurately, analyst Matthew Dodds said in a research note.

INVOS is Somanetics' oxygen monitoring system, which is marketed by Covidien Ltd (COV.N: Quote, Profile, Research, Stock Buzz) in Europe, Canada, the Middle East and South Africa.

Potential to resolve current inequities with the Covidien distribution deal could add 7 cents to earnings per share, but a new contract is unlikely before 2009, Dodds said. (Reporting by Aradhana Aravindan in Bangalore; Editing by Amitha Rajan)