sutthirat sutthisumdang
Baird has chosen Alcon (New York Stock Exchange:ALC), Stryker (New York Stock Exchange:SYK), Cooper Companies (NASDAQ: COO), Axonal (NASDAQ:AXNX) and Boston Scientific (New York Stock Exchange:BSX) as your top medtech pick for 2024.
While he admits that medtech has underperformed the S&P 500 for three straight years, Baird said he likes The sector setup is moving into 2024, pointing to easing concerns about the impact of GLP-1 drugs, “strong” top-line fundamentals and improving margins.
The investment bank said it believes valuations have begun to “better integrate” concerns about LPG-1, the upcoming US election and macroeconomic issues. He noted that medtech is generally not as affected by elections as other healthcare subsectors and is often seen as a defensive play in times of macroeconomic uncertainty.
“If investors focus on high-quality names with strong new product cycles and pricing power (rarely seen in MedTech), we believe outperformance can be achieved,” the analysts wrote in their note.
Baird also forecasts a recovery in margins in 2024, helped by new product launches, improved pricing power and greater standardization of supply chains.
The investment firm said Alcon, Stryker and Cooper “top our list” because they all have product cycles and pricing power.
Baird said that while Alcon stock was not cheap, he believes concerns about AT-IOLs, or advanced technology intraocular lenses, and cataract volumes “seem overblown.”
“We remain big fans of Alcon's co-specific contact lens cycle and the sustainability of contact lens pricing tailwinds overall, and we believe 2024 will be a strong year for margin improvement,” the analysts wrote.
Baird also likes contact lens maker Cooper for similar reasons, but prefers Alcon Surgical to CooperSurgical. He also believes Alcon will see greater margin expansion in 2024 than Cooper.
As for Stryker, Baird believes the company's margins will benefit in 2024 from the “premium” prices tied to the launches of its MedSurg products. He also sees “solid trends in orthopedics end-market demand and continued gains in robot-powered core orthopedics share.”
The investment bank also has “high conviction” in fiscal 2024 and 2025 for revenue/profit growth from Boston Scientific and Axonics.
Baird said Axonics “has one of the best outlooks for positive, improving and sustainable earnings for fiscal 2024 and beyond.” The investment bank sees upside to its 23% growth estimate, with Axonics gaining share in the US sacral neuromodulation market. Baird added that the company was “emerging as a long-overdue CNS.”
As for Boston Scientific, Baird believes that “significant” new product launches will position the company to accelerate revenue growth through 2025. He added that margin improvements should “support BSX's premium valuation.”
Baird said Inspire Medical Systems (INSP) and Intuitive Surgical (ISRG) “nearly missed” his list of top picks due to valuation and “potential near-term headline risk.” The investment firm, however, remains “confident in the long-term prospects and would be a buyer in the event of any setback.”
