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After trailing the market for three years, Baird has forecasted a bullish run for the medtech sector in 2024. However, they remain wary of the dental and aesthetics markets in the near future.
The investment bank revealed that medtech experienced a surge following last week’s investment conference in San Francisco, with the iShares US Medical Devices ETF outperforming the S&P 500 over the past five days, rising 2.8% versus the S&P’s 1.6% climb.
Bullish Predictions for Medtech
Baird has articulated a strong endorsement for medtech by listing Alcon (ALC), Stryker (SYK), The Cooper Companies (COO), and Boston Scientific (BSX) as top picks for 2024. These selections have now been joined by Dexcom (NASDAQ:DXCM), and Intuitive Surgical (NASDAQ:ISRG) and Inspire Medical Systems (NYSE:INSP) are “creeping closer” to being included in the top picks list.
Baird’s upbeat sentiment is based on the robust demand witnessed in Q4 for various medtech products such as hip/knee replacements, diabetes devices, contact lenses, ophthalmology products, cardiovascular and neuromodulator devices, and surgical robotics. Companies that preannounced earnings surpassed Street Q4 revenue estimates, aligning with consensus 2024 expectations and thereby reducing the risk of future reports.
Concerns in the Dental Market
Despite the positive outlook for medtech, Baird has expressed caution regarding dental companies like Dentsply Sirona (XRAY), Envista (NVST), and Henry Schein (HSIC). The investment bank has shifted its view of the dental group from “tactically positive to tactically neutral to even slightly negative.” This change in stance is accompanied by a more cautious 12-month view on all but Align (NASDAQ:ALGN).
Aesthetics Market and Other Investment Insights
In the aesthetics market, Baird has identified InMode (INMD) and Apyx Medical (APYX) as well-positioned for the ongoing shift from liposuction to body contouring. Additionally, the firm believes that companies focused on skin-tightening procedures will benefit from the popularity of GLP-1 weight-loss drugs.
Despite positive sentiments, Baird has cautioned InMode investors to be prepared for a potentially modest 2024 revenue growth compared to 2023.
Baird predicts that medtech margins will improve this year as companies refocus on enhancing efficiency after years of grappling with supply chain woes. The investment bank has also highlighted Boston Scientific’s planned merger with Axonics (AXNX) as a strong indicator of its position as a top idea for 2024.
Among individual companies, Baird has added Dexcom to its top picks list, citing its non-insulin sensor Stelo as a key driver of growth. The firm also anticipates around 25% to 30% EBITDA growth over the immediate term.
Intuitive Surgical and Inspire Medical are also closely watched by Baird, with Intuitive “creeping closer” after issuing a “no comment” about a new system in 2024, while Inspire “remains on the edge given anticipated volatility surrounding SURMOUNT-OSA’s early 2024 readout.”
