Bank of America analysts say that they are bullish over the medtech industry as surgical procedure recoveries in recent months bode well for the field.
In an analysis published yesterday, BofA said medtech management teams are likely remaining cautiously optimistic amid recovery efforts brough on by the impact of COVID-19, but they are growing in confidence with regard to the quality and durability of demand for their products, with Medtronic’s (NYSE:MDT) recent earnings call and talks with Stryker (NYSE:SYK) suggesting the air of confidence.
Additionally, BofA analysts say that, as innovation pipelines are full, valuations in the industry remain reasonable, there is no drug pricing risk and medtech has outperformed the last three recessions.
Medtronic, Stryker and Baxter (NYSE:BAX) are three companies driving the narrative behind the BofA analysts’ confidence, but they did downgrade Intuitive Surgical (NSDQ:ISRG) from “Buy” to “Neutral,” citing more upside in other names over the next year compared to the surgical robotic technology developer.
According to the analysts, one potential risk to medtech stocks as we near the end of 2020 is the potential demand air pocket in the late stages of the third quarter or into the fourth quarter if there isn’t enough new demand to offset the impact of delayed procedures.
Additionally, a broad-healthcare sell-off surrounding the 2020 U.S. presidential election in November poses another threat to the industry.
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