While a recent judge’s ruling may have thrown a wrench in the future of the Affordable Care Act, the reality is that rulings of this magnitude are challenged and will go up the chain to perhaps the Supreme Court. Credit Suisse’s Matthew Miksic issued a broad new sector coverage for medical devices and related companies with strong Outperform ratings on Tuesday.
Credit Suisse examined a “value creation” to identify for the areas on which the firm thinks investors should focus. The firm issued three key themes that it sees having markets that could nearly triple in size by the end of 2025.
As a reminder, Credit Suisse generally calls for its ratings to be versus broader peers rather than just an absolute market comparison. Here are Credit Suisse’s medical device and related sector calls from Tuesday’s new initiations.
This is a longer-term call for three to five years (and beyond). The three segments that are viewed favorably in this call are structural heart, robotic surgery and diabetes. Miksic’s note said:
The incremental dollar market value created in a given segment over the next 3-5 years is a key metric, combining potential growth with the addressable scale of each end-market. . We expect these to be at the forefront of the next wave of disruption in MS&D in the coming years. SH, RS and Diabetes have grown to a scale that is meaningful enough to drive substantial dollar sales growth. Markets in the ‘sweet spot’ are in the early- to mid-stages of the high-growth phase of the MS&D lifecycle with at least several years of runway ahead of them on the steep segment of the MS&D S-curve.
An additional note is included after each company’s rating shows how each of these markets may triple from now through the end of 2025.
We have included the consensus analyst price target from Thomson Reuters to see if Credit Suisse was above or below the pack on its longer-term price targets. Here are 10 new Outperform ratings in medical devices and related areas for investors in 2019 and beyond.
Abbott Laboratories (NYSE: ABT) was started with an Outperform rating and assigned an $82 price target. The stock was up 1% at $70.45 a share on Tuesday morning, in a 52-week range of $55.58 to $74.92 and with a consensus target price of $79.44.
Baxter International Inc. (NYSE: BAX) was started with an Outperform rating and assigned a $77 price target. It was last seen up 1% at $64.90, in a 52-week range of $61.05 to $78.38. The consensus price target is $74.00.
Boston Scientific Corp. (NYSE: BSX) was started with an Outperform rating and assigned a $42 price target. The shares were up 1.5% at $34.58 on Tuesday morning. The 52-week range is $24.79 to $39.44, and the consensus target price of $42.41.
Edwards LifeSciences Corp. (NYSE: EW) was started with an Outperform rating, and the assigned price target was $188. The stock recently traded up about 1% at $156.40, with a consensus price target of $169.21. The stock has a 52-week trading range of $110.68 to $175.00.
Globus Medical Inc. (NYSE: GMED) was started with an Outperform rating and a $53 price target. It traded up 2% at $45.01, in a 52-week range of $39.05 to $57.83. The consensus analyst target is $61.60.
Integra LifeSciences Holdings Corp. (NASDAQ: IART) was started as Outperform and assigned a $57 target price. The shares were last seen up 2% at $48.03, in a 52-week range of $45.96 to $67.50. The consensus price target is $60.62.
Medtronic PLC (NYSE: MDT) was started as Outperform with a $109 price target. Medtronic was up 1% at $92.89 on Tuesday morning, in a 52-week range of $76.41 to $100.15. The consensus target price is $104.32.
NuVasive Inc. (NASDAQ: NUVA) was started with an Outperform rating and a $66 price target. It traded up about 1% at $53.59, with a consensus price target of $65.29. The stock has a 52-week range of $44.62 to $72.41.
Stryker Corp. (NYSE: SYK) was started with an Outperform rating and assigned a $195 price target. Shares traded up 1% at $161.84. The 52-week range is $146.80 to $179.84 and the consensus price target is $187.15.
Wright Medical Group N.V. (NASDAQ: WMGI) was started as Outperform with a $33 price target. The stock was last seen up nearly 2% at $27.15, with a consensus price target of $34.00. The 52-week trading range is $19.01 to $30.75.
One company was viewed unfavorably compared with its peers in the group. Zimmer Biomet Holdings Inc. (NYSE: ZBH) was started with an Underperform rating and assigned a $102 price target at Credit Suisse. This equivalent of a “Sell rating” caused a one-third percent drop to $105.85 on Tuesday morning. The consensus target price is up at $134.84, and the 52-week trading range is $104.28 to $134.55.
In the structural heart theme, disruption of open heart surgery by minimally invasive devices is expected to the primary driver. This $5 billion market could grow to $15 billion by 2025.
In robotics and advanced surgical technologies, the conversion of conventional surgeries to robotically assisted procedures is expected to be the primary driver. This $4 billion market is expected to grow to $14 billion by 2025.
In diabetes care, one major growth function is eliminating the finger prick by using mobile devices to monitor and manage blood glucose levels. This sector of the diabetes market is currently at $6 billion market and Credit Suisse expects it to rise to $15 billion in 2025.