metamorworks
BofA Securities’ top medtech picks for 2024 are Boston Scientific (NYSE:BSX), Stryker (NYSE:SYK), Intuitive Surgical (NASDAQ:ISRG), Dexcom (NASDAQ:DXCM) and Shockwave Medical (SWAV).
The investment bank said it favors the names largely because it regards them as “high quality, profitable companies, consistently executing, that can compound earnings faster than average.”
Given the uncertainly about how GLP-1 drugs will impact medtech in the long term, BofA sees investors discounting future earnings and instead gravitating towards companies that are making profits now.
BofA noted that it will take time for a consensus view to form on what impact GLP-1s will have on the sector mid-term, but in the near-term “more investors will have confidence step in once medtech can start digesting positive GLP-1 headlines.”
It added that upcoming data from Novo Nordisk’s (NVO) SELECT clinical trial for its GLP-1 drug semaglutide, expected in November, “will be a key signal.”
The investment bank said it favored Dexcom as it saw “plenty of growth ahead even with a GLP-1 altered TAM,” while Stryker was picked for its higher long-term growth prospects from the launch of new products and margin upsides as it returns to pre-COVID margins.
BofA also maintained its buy rating on Boston Scientific, commenting that product launches give the company the ability to achieve double-digit growth for several years and compounded EPS “at even a higher rate.”
The bank said it’s also maintained its buy rating on Intuitive Surgical as “we see more pipeline visibility coming which could expand the multiple, especially if it expands the TAM.” As for Shockwave, BoA said it saw “attractive growth over the next several years, given the competition keeps taking longer and SWAV continues to innovate.”
In addition to its top picks, BofA also has buy ratings on Abbott (ABT) and Becton Dickinson (BDX).
BofA had a price objective for Abbott of $115, based on 25x the bank’s 2024E EPS. BofA admitted that the multiple was a “premium for a high single digit organic grower,” but noted that Abbott’s forward multiple had averaged 27x over the last three years, according to its note dated Oct. 16.
“Abbott likely deserves a premium for its balance sheet, above average durability in recession and upside optionality with COVID testing,” BoA added.
Becton Dickinson, meanwhile, had a price objective of $305, based on 22x BofA’s calendar CY24E EPS. The bank said it saw the multiple as warranted for a “mid-single digit grower with the ability to raise prices in an uncertain macroenvironment.”