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BTIG sees increased stability for the medtech sector in 2024 as it moves past concerns about the impact of GLP-1 weight-loss drugs, supply chain snarls, and higher interest rates.
“With GLP-1 fears cast aside, we think MedTech is poised to have a better year in 2024 on the back of a stable-to-improving environment,” BTIG analysts wrote in a note released on Friday.
While the sector may not realize the growth seen in 2023, which was helped pandemic-related pent-up demand, it should see improvements in P&L and supply chain management along with decreased headwinds from inflation and pricing. Despite this, “fears about tougher comps may be a topic for much of 1H 2024,” the analysts said.
The investment bank also sees medtech benefitting from the 2024 election cycle, noting that the sector has a tendency to perform better than the S&P heading into elections.
“We think that in this upcoming election year, MedTech may enjoy relative calm versus its healthcare peers in biotech and pharma, which are regularly targets for politically charged headlines on pricing,” BTIG analysts wrote. They added that expectations that the Federal Reserve is finished with rate hikes “may also revitalize the funding environment.”
BTIG’s top picks for 2024 are Abbott Laboratories (NYSE:ABT), Glakos (NYSE:GKOS), Zimmer Biomet (NYSE:ZBH), iRhythm Technologies (NASDAQ:IRTC) and RxSight (NASDAQ:RXST).
“We continue to view Abbott as one of the best-positioned names for 2024, whether the year ahead brings a favorable environment for MedTech stocks or another period of volatility,” wrote BTIG analysts, adding that the stock was “an attractive name whether investors are chasing growth or hunkering down.”
BTIG pointed to numerous reasons why Abbott was a top pick, including med device sales growth in the mid-teens, recovery in its nutrition business, improving margins, product launches, a “robust” balance sheet, “Dividend King status,” and the ability to act on M&A opportunities and share buybacks.
The investment firm said iRhythm, meanwhile, has several upcoming catalysts, including the potential resolution of an FDA warning letter. Coupled with an improving profit outlook and “attractive” valuation in comparison to peers, “we think IRTC can outperform in 2024.”
BTIG said it has become more constructive on Zimmer for 2024, viewing its valuation as “reasonable,” with opportunities for “enhanced” topline growth and operating margin leverage along with improved adjusted EPS growth.
As for Glaukos, BTIG noted that the company received FDA approval for its glaucoma medication iDose TR earlier than expected, which boosted shares. But BTIG also thinks that the company’s core Micro-Invasive Glaucoma Surgery business has “upside potential” and “the story gets even cleaner in fiscal year 2024 with the iDose questions out of the way.”
If the Glaukos is able to get repeat usage momentum for iDose, “we believe shares could rapidly appreciate,” BTIG added.
As for RxSight, BTIG noted that the shares had climbed over 200% year-to-date. But as neither Alcon (ALC) nor Johnson & Johnson (JNJ) are expected to have any major interocular lens product cycles next year, BTIG believes “the road just opened up for RXST to put its foot on the gas on the way to being a multi-billion dollar company.”
BTIG rates all five stocks as buys.
SA’s current quant ratings for the companies are as follows: Zimmer Biomet, hold; Glaukos, buy; RxSight, strong buy; iRhythm Techologies, hold; Abbott Laboratories, hold.
