Investing.com – At the start of each quarter, Deutsche Bank presents its top investment ideas for each sector over the next 12 months. It’s time to shine a light on the healthcare sector.
The first healthcare sector player Deutsche Bank is looking at with interest is Edwards LifeSciences (NYSE: ), which has a “buy” rating and a $103 price target.
“Edwards represents one of the leading growth stories in the large-cap medtech sector over the next few years, with a steady stream of significant catalysts in the pipeline over the next two years to keep investors engaged,” Deutsche Bank analysts said in a July 2 note.
“We are increasingly confident in Edwards’ ability to deliver LDD+ (low double digit) revenue growth over the forecast period,” the bank said, “primarily based on improved visibility around the emerging TMTT segment where several innovative therapies with game-changing potential are now in the early commercial launch phase and are treating large numbers of patients with mitral and tricuspid valve disease, where cure rates are low despite their lethality due to the scarcity of therapeutic options.”
Icon (NASDAQ:ICON), the world’s leading clinical research organization, has a “buy” rating from Deutsche Bank, with a $370 price target.
“Icon remains one of our top picks with: 1) upside potential for organic revenue and EPS growth; 2) margin expansion of more than 40 basis points; 3) potential share buybacks and lower interest costs; and 4) potential multiple expansion given that the stock is trading at less than 15% versus a historical premium,” Deutsche Bank said.
The German bank added that the fundamentals of the end market remain sound, with large biopharma R&D activity on track to grow at low +SD (single digits) despite headline spending cuts. Fundraising in biotech continues to improve, and our industry checks confirm healthy RFP activity.
Pharmaceutical giant Merck & Company (NYSE:) also received a “buy” rating with a $140 price target.
Merck’s Keytruda, a humanized antibody used in cancer treatment, has established itself as the backbone of oncology regimens that we believe offer strong growth outlook through fiscal 2028, Deutsche Bank said.
Keytruda’s success also positions it to be eligible for the Inflation Reduction Act in FY28, and Medicare volumes are guaranteed. Its clinical profile provides a moat that could widen with early data and formulations.
Furthermore, vaccines and animal health provide consistent free cash flow and some modest growth. Lifecycle management is starting to emerge, and a strong launch of Winrivir (a drug used to treat pulmonary hypertension) provides upside potential in the near to medium term.
Repligen Inc. (NASDAQ: ), a company dedicated to developing and producing materials used in the manufacture of biologic drugs, recently received a “buy” rating, with a $155 price target.
“We believe Repligen is best positioned to benefit from the bioprocessing recovery given 1) significant margin expansion and top-line growth opportunity; 2) product and commercial strategy to drive above-market growth; 3) deep bench strength from the CEO transition and recent hires; and 4) recent underperformance with the stock down (41%) since its February peak.”
Tenet Healthcare (NYSE:) is another company with a “Buy” rating and a $155 price target.
The multinational, for-profit healthcare services company has transformed itself from a highly leveraged, volatile company to a company with consistent and stable EBITDA growth over the past five years.
While this hasn’t gone entirely unnoticed, evidenced by the 82% drop in Tenet shares in the first six months of 2024 compared to just a 16% gain for the S&P 500, Deutsche Bank notes that the current multiple of 7.4x 2025 EBITDA is just 7% higher than Tenet’s two- and seven-year averages.
“Therefore, we believe that the market is underestimating the opportunity and not giving Tenet enough credit,” Deutsche Bank concluded.
Finally, healthcare and insurance company Cigna (NYSE:) Group received a “Buy” rating and a $370 price target.
Cigna raised its long-term earnings growth guidance by 100 basis points in March, while launching a new program around access to its GLP1 drug (used to treat diabetes and obesity) and its next competitive offering in the biosimilar market, Humira (used to treat rheumatoid arthritis).
“We believe the investment thesis in Sigma is justified by the growth of the most profitable commercial market,” said analysts at Deutsche Bank. “We believe the company has successfully overcome challenges in the core business with good customer retention and new business wins.”