U.S. Medtech: Another step down after HCA pre-release; is there any relief in sight for the sector?

Research evidence excerpt

U.S. Medtech: Another step down after HCA pre-release; is there any relief in sight for the sector?

an increasingly important factor driving medtech valuations. Medtech stocks that were loved

in late 2024 at all-time-high valuations are now hated at 10-year-low valuations. We’re not yet willing to concede that market

health is deteriorating, but even if that turns out to be the case, there must be opportunity for investors at these valuations (see

Exhibit 3). After all, these are quality companies operating in attractive oligopoly markets, medtech innovation continues at a

rapid pace, and there are plenty of secular tailwinds that will continue to drive growth.

We forecast progressive recovery for the group as idiosyncratic risks are retired one by one. It doesn’t look like medtech will

get much help from JNJ’s Q2 results. We don’t expect to get much help from Abbott, either, but if ABT can show recovery in

Nutrition and stabilization in Structural Heart, investors might start to get excited about broadening access for CGM and the

growth opportunity in EP. Perhaps Intuitive Surgical’s portfolio of launches (dV5, Ion, SP, XiR, AI) can continue to drive strong

quarterly financial performance, and maybe investors will find it harder to ignore ISRG as estimates continue to march higher.

Perhaps Stryker can deliver a healthy Q2 beat and restore confidence that the business will continue strong execution despite

the cyberattack-related hiccup. Recovery for Boston Scientific would go a long way to restoring confidence in the group.

Questions continue to swirl about decelerating growth for Watchman and EP. As we get clarity on when and where growth

rates will bottom out for these key franchises, and as reset LRP expectations begin to come into focus, we see the potential for