Mister
Bernstein is bullish on medtech stocks Thermo Fisher, Guardant Health, Revvity and PacBio, but sees more downside for Illumina, according to a new industry note.
The investment company initiated coverage of the US life sciences diagnostics and tools sector. last week, stating that the subsector had “vastly” outperformed the broader market despite some instability in recent quarters.
Bernstein attributed the recent weakness in part to factors such as post-COVID inventory drawdowns, economic woes in China and “caution” in biopharmaceutical spending. But he also said a correction was expected given past performance.
“Actually, for an industry that talks about roughly 4% to 6% long-term core organic growth, we’ve been above that for years, so some correction/reversion to the mean isn’t surprising” , Bernstein analysts wrote in their note dated September 27.
The good news, Bernstein said, is that the long-term demand drivers for the subsector “are still in place” and that the “reshuffle” created an opportunity for investors to buy long-term “winners” at a reasonable price. an attractive entry point and “take advantage of the short-term dynamics that depress the share price.”
Topping Bernstein’s list for diversified toolmakers was Thermo Fisher (New York Stock Exchange:TMO) and Revvity (RVTY). The bank set Thermo’s price target at $603 and Revvity’s at $133.
Meanwhile, Bernstein rated Avantor (AVTR) a market perform, commenting that despite high recurring revenue and relatively low exposure to China, he believed investors “needed time to overcome recent stumbles” and that the the action was “justified.” Bernstein’s price target for the stock is $22.
Agilent (A) and Waters (WAT) also received market perform ratings, with Bernstein saying he expects the slowdown in instrument demand to continue and that both companies have “limited upside from important strategic actions.” Bernstein set a price target of $123 for Agilent and $280 for Waters.
As for next-generation genomic sequencing, Bernstein said he’s optimistic about Pacific Biosciences (NASDAQ:PACB) but bearish for subsector giant Illumina (NASDAQ:ILMN), due in part to a shift from short-read sequencing by synthesis, or SBS, which Illumina dominates, to a “more competitive landscape” that includes technologies such as long-read sequencing.
In the case of Illumina, Bernstein claimed that its “monopoly” was under attack, making it the relative “loser” in the space. Bernstein rated Illumina as underperform, despite a “huge collapse” in its stock price. “We think there are more downsides,” Bernstein added, setting Illumina’s price target at $111.
Meanwhile, Bernstein said he viewed PacBio as the relative “winner,” stating that PacBio’s portfolio was set to capture market share in both the long-read and short-read categories. “PacBio is at a huge inflection point in growth,” the investment firm added. Bernstein rated PacBio Outperform, with a price target of $11.
Guardian Health (NASDAQ:GH) was Bernstein’s top pick in the molecular diagnostics space, and the bank rated it Outperform with a $34 price target. Citing Guardant’s “first-mover advantage,” Bernstein believes the company will deliver “superior growth.” Bernstein added that he viewed a recent pullback in the stock as a buying opportunity.
Bernstein was also bullish on Exact Sciences (EXAS), commenting that while the stock may look expensive compared to its peers, the “premium is justified” by the company’s lower downside risk and positive cash flow. Bernstein rated Exact Sciences an Outperform, with a price target of $83.
Meanwhile, Natera (NTRA) was labeled “exciting,” but still received a market perform rating, as Bernstein believes the company’s minimal residual disease, or MRD, product is “further than expected.” that the market appreciates”.
Bernstein warned investors, however, not to short Natera shares, as the company’s 22Q valuation could represent a $600 million market opportunity. The company set its price target for the stock at $48.
More on medical technology stocks
Guardant Health Stock Rises After Piper Sandler Upgrade
ai will account for 11% of healthcare budgets by 2024 – Morgan Stanley
Despite a slower second quarter, Needham forecasts the medtech market to grow 7% in 2023
Carl Icahn says Illumina’s new CEO has his ‘full support’
Illumina names Agilent executive as new CEO