Needham analysts upgraded Stryker
(NYSE: SYK)
from “Neutral” to “Buy” ahead of potentially significant improvements in the coming years.
Analysts Mike Matson, David Saxon and Joseph Conway expect new product launches and capital equipment backlog to deliver upside. They believe the company could come in ahead of revenue estimates and overcome any potential market slowdown.
The analysts also say that Stryker expects to increase its M&A activity — a strategy CEO Kevin Lobo outlined last year. Needham believes the deals could serve as positive catalysts.
“We find SYK shares attractive considering its potential for double-digit organic revenue growth and upgrade our rating to Buy from Hold,” they wrote.
New product launches include updates to Mako, with Shoulder and Spine applications slated for this year. (Read about Stryker’s anticipated launches and other major 2024 launches across medtech HERE). The analysts also pointed to the company’s next-generation LifePak 35 monitor/defibrillator, which it debuted last month.
“We see Mako Shoulder and Spine as growth drivers for these respective businesses,” the analysts said. “SYK has also indicated that its capital order backlog is strong, and we believe that this will provide a tailwind for MedSurg.”
On M&A, the analysts say Stryker completed more than 50 acquisitions over the past 10 years. While deal volume was smaller in recent years, management indicated that the company is ramping up M&A efforts with more deals likely in the next few years. The analysts noted peripheral vascular, neuromodulation, women’s health, urology and soft tissue robotics.
“We think that additional tuck-in deals are most likely and given its successful M&A track record, we expect deals to serve as positive catalysts,” the analysts said. “We view Stryker as one of the best positioned large-cap med tech companies.”
