Kevin Huang, an analyst with CFRA Research, highlights three stocks from the broad healthcare market that each recently earned upgrades to "strong buy" ratings. Here's his review from the CFRA's flagship weekly newsletter, The Outlook.
On March 13, CFRA raised its opinion on shares of BioMarin Pharmaceutical (BMRN) to Strong Buy from Buy as we see greater upside potential following recent stock market volatility. In addition, we favorably view BMRN as a high-quality defensive name, considering growing recession concerns.
We think BMRI’s growing proficiency at commercializing and developing rare disease treatments is undervalued. BMRN has two promising late-stage products — Val-Rox for hemophilia A and Vosoritide for achondroplasia.
We expect positive Vosoritide data by mid-2020, which should be swiftly followed by regulatory submissions in 2H 2020. We also anticipate U.S. regulatory approval of Val-Rox by mid-2020 and European regulatory approval shortly thereafter.
We view BMRN favorably because it is a large, diversified supplier of reputable medical devices and supplies, making it a preferred vendor for the hospital industry. Our 12-month target of $118 is based on our net present value analysis of BMRN's commercial and developmental therapies.
On March 9, CFRA raised its opinion on shares of Boston Scientific (BSX) to Strong Buy from Buy, while we lowered our target price by $3 to $47 to reflect the anticipated impact of Covid-19 on earnings. Our price target is based on a forward P/E multiple of 27x our 2020 EPS estimate. In our opinion, recent stock market volatility has increased the relative attractiveness of BSX shares.
The rapid global spread of the virus, with 100 confirmed and presumptive cases now in the U.S. according to the CDC, will translate to a greater need for testing in the U.S., which DGX is in a strong position to provide, by our analysis. Although BSX had some minor setbacks in 2019, we are confident in the company’s long-term positioning.
BSX recently commercially launched many new products with significant upside potential, such as the LOTUS Edge TAVR aortic valve system and the Watchman FLX device. In 2020, we expect muted M&A activity as management focuses its efforts on product launches, building capacity, and acquisition integration.
On March 6, CFRA raised its opinion on shares of Stryker (SYK) to Strong Buy from Buy as we lowered our 12- month target price to $234 from $248 to reflect the anticipated adverse impact of Covid-19 on the company's value.
We lower our 2020 EPS estimate to $9.00 from $9.17 and our updated price target reflects a forward P/E ratio of 26x our 2020 EPS. Given SYK's recent share declines (approximately 12% in March, on top of 9.5% decline in February), we see upside potential for the shares because we think investors overreacted to Covid-19's potential impact on SYK's valuation.
We see long-term strength in the orthopedics business as SYK continues to roll out its MAKO robotic-arm system. SYK's competitive footing has been aided by the recent weakness of its primary competitor, Zimmer Biomet, which has had manufacturing compliance issues.
We also view SYK favorably because it is a large, diversified supplier of reputable medical devices and supplies, making it a preferred vendor for the hospital industry.
