Healthcare Business

Jefferies 5 High-Conviction Health Care Stocks to Buy for the Second Half

With the first half of what has proven to be a remarkable 2020 coming to a close, many of the firms we cover across Wall Street already are looking to the second half of the year, with what should be an improving economy as we emerge from the COVID-19 pandemic lockdowns. One thing’s for sure: The rally everybody was looking to arrive in the second half of the year may have come already.

Despite the sell-off on Tuesday, the S&P 500 has made a stunning reversal off the March 23 lows, recouping almost all the losses, while the Nasdaq composite index actually printed an all-time high on the strength of the mega-cap tech giants.

Jefferies analysts were tasked recently with providing their 50 top high-conviction ideas for the second half of 2020 and beyond. They noted this in the research report:

We present the US Research team’s current top ideas, spanning all sectors under coverage. With representation from nearly every publishing analyst, we highlight 50 stocks we find particularly attractive. These are our highest conviction ideas, regardless of theme or macro backdrop, and include our Franchise Picks.

We screened the health care picks, as the sector has solid momentum heading into the second half of 2020, and found five solid ideas for long-term growth investors.

Amedisys

This leading health care stock is a pure-play on an aging nation. Amedisys Inc. (NASDAQ: AMED) provides health care services in the United States. It operates through three segments. The Home Health segment offers a range of services in the homes of individuals for the recovery of patients from surgery, chronic disability or terminal illness, as well as prevents avoidable hospital readmission through its skilled nurses; rehabilitation therapists specialized in physical, speech and occupational therapy; and social workers and aides for assisting its patients.

The Hospice segment offers services that are designed to provide comfort and support for those who are dealing with a terminal illness, including heart disease, pulmonary disease, Alzheimer’s or cancer. The Personal Care segment provides assistance for patients with the activities of daily living. As of February 18, 2020, the company owned and operated 479 care centers in 38 states and the District of Columbia.

The analysts said this:

Amedisys is the largest player in home health (#1 home nursing, #3 hospice), well-positioned to benefit from the accelerating shift in care delivery from nursing homes and other high-cost facility-based settings to the home. The company is on track to deliver high single digit organic growth in 2021 and beyond, while management’s aggressive M&A push should contribute incremental growth and also yield earnings upside surprises. Amedisys has already announced a relatively large acquisition in hospice, which should push 2021 estimates higher over the next few weeks.

Jefferies has a $225 price target for the shares, while the Wall Street consensus target is $213.08. Amedisys stock closed Tuesday at $176.42 a share.

BioMarin Pharmaceuticals

This Wall Street favorite was a recent addition to the Jefferies Franchise Picks list. BioMarin Pharmaceuticals Inc. (NASDAQ: BMRN) develops and commercializes innovative biopharmaceuticals for serious diseases and medical conditions. Its product portfolio comprises five approved products and multiple clinical and preclinical product candidates.

Over the past decade, BioMarin has become one of the top orphan drug companies, and it looks poised to stay there.  Roche recently has been mentioned as a company that could be looking at BioMarin. Roche is focused on oncology drugs and invests heavily in early-stage molecules.

The consensus earnings forecast for 2020 has been scaled down by a penny per share. However, the full-year 2021 estimate has been lifted to $1.20 per share from the previously forecast $1.13.

The analysts noted this:

Our proprietary work leads us to believe that upcoming launches for valrox and vosoritide are likely to ramp faster than consensus expectations. We forecast a revenue compounded annual growth rate of 17% thru 2024.

The Jefferies price objective is $132, but the consensus target is way below that figure at $120.18. BioMarin stock closed at $105.09 on Tuesday.