Medical technologies such as insulin pumps and blood glucose monitors have been widely used in the United States this year, but the stock prices of manufacturing companies have fallen far behind. S&P 500 Index and other broad market performance, but analysts at investment bank RW Baird believe that the situation may soon change in 2024, and some outstanding medical technology companies will usher in a more rewarding year.
Last summer, investors sold off diabetes and heart disease device-making stocks as Wall Street thought Eli Lilly & Co. (LLY-US) and Denmark’s Novo Nordisk are launching new weight-loss drugs that will reduce these illnesses, however, pump maker Insulet (PODD-US) and cardiovascular repair pioneer Boston Scientific (BSX-US)’s revenue continues to grow.
Baird said that until new weight-loss drugs (GLP-1s) have a significant impact on their target patient groups, these companies’ revenue will continue to grow in 2024, so the investment bank’s 2024 outlook report reiterates that Boston Scientific stock “outperforms” “Broad Market” rating, and raised Insulet’s stock rating to “Outperform” from “Neutral.”
Baird analysts Jeff Johnson and David Rescott wrote that although their medical technology report has not yet sounded the alarm on the GLP-1 issue, investors should be more aware that “obesity will remain a global burden in the next decade.”
Even though Insulet has recovered some of the losses caused by GLP-1 in the summer and recently reached a price of $220 per share, it is still down nearly 25% so far this year. However, Johnson believes the company’s revenue will grow 26% this year to $1.65 billion, with profits growing 45% to $1.88 per share (excluding non-recurring expenses).
As insulin pumps are increasingly adopted by diabetics. Baird analysts said this will allow Insulet to maintain an annual revenue growth rate of about 20% in the next few years and profit growth at a faster rate. Therefore, he believes the stock will return to a premium valuation of about 50 times operating cash flow, which means Insulet will rise to $238 next year. Insulet’s stock price rose 2.10% on Tuesday to close at $220.71 per share.
Johnson to sell glucose monitor maker DexCom (DXCM-US) stock was rated as “outperform.” The stock rose 1.13% on Tuesday (26th) to close at $123.55 per share.
At current prices, the stock has climbed back from the $75 lows it fell to in late October amid the GLP-1 hit. Johnson believes that before GLP-1 has a significant impact, DexCom’s profits will expand and revenue will grow at a rate of more than 20% for several consecutive years. His target price is US$161.
Baird analyst Rescott favors diversified device maker Boston Scientific, calling it a “best-in-class medical technology company.”
He believes the stock will rise to $64 from the current level of about $56 after the company launches new products in 2024, including products to treat arrhythmias and heart valves. Revenue growth will accelerate in the second half of 2024, thereby boosting earnings per share, raising it from this year’s level of $2 per share to $2.26.
2023-12-27 04:50:06
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