Summary List Placement
Medical technology stocks performed strongly in 2020, benefitting from the wider healthcare tailwinds caused by the pandemic, and this is set to continue into 2021 for companies in the sector with strong fundamentals, according to Bank of America.
Healthcare companies have been at the top of the agenda throughout the pandemic, with the likes of drugmakers Pfizer, Moderna and AstraZeneca making the headlines with their COVID-19 vaccine candidates that have been at the fore of every investor’s mind over the last month.
As many of these defensive sectors operate on historically expensive valuations, medtech offers a strong investment opportunity with good fundamentals and structural tailwinds at not “unreasonably expensive” prices, the BofA said in a note including analyst Patrick Wood.
The European medtech sector in particular boasts “higher quality growth names”, which have become increasingly attractive, thanks to the massive shift out of growth stocks this year, the note said.
When news that an effective vaccine had emerged from clinical trials in November, many investors saw the possibility of a return to ‘normal life’ and therefore economic recovery, prompting them to move into value stocks which historically perform well when economies grow. But, BofA argue that particularly in the current environment of low to flat yield curves, high quality growth names are still preferable “over value”, the note said.
In addition, payors look in “good shape,” the note said, supported by federal programs. US demand across the Medicare and insurance markets are expected to remain steady, the note added, highlighting that there are “strong insurance reserves from low utilization over FY20E on lower elective procedure rates.”
BofA believes strong recovery in China and continued low single-digit growth in the UK, France and Germany in particular, will put healthcare budgets “more in focus post pandemic.”
However, not all names are winners, the note said. BofA also listed four names in the sector that are underperformers.
Ambu, a Danish endoscopy solutions company. BofA are concerned of delays to the “Duodenoscope launch in H2 FY21” as well as increased competition from the US.
Sonova, a Swiss hearing care company, is at risk from “new market entrants” as well as competition from GN & Demant, the note said, adding that the company has “little upside from here.”
Elekta, a Swedish company offering treatment for cancer and brain disorders, has seen its shares near “all-time highs” and BofA see a “more competitive radiotherapy environment going forward,” the note said.
BioMérieux, a French biotechnology company, is also close to all-time share price highs and may have tougher competition and longer term headwinds, meaning BofA see “a downgrade risk in FY21,” the note said.
Here are the 16 medtech stocks that BofA think are well-place to gain post-pandemic. The following stocks also have “Buy” ratings from the firm’s analysts.
Fresenius Medical Care
Ticker: ETR: FME
Market Cap: €19.65 bln
Old PT/New PT: 69.4/86.0
% Upside: 26.81%
“Our PO for FMC of €86/US$53.00 uses a P/E multiple of 18x 1-yr fwd earnings, in line with the historical multiple for FME but still maintaining FME’s 15% discount relative to EU medtech peer group. Our EV/EBITDA …read more
Source:: Business Insider