BMO Capital Markets has identified Intuitive Surgical Inc (ISRG.US), Globus Medical Inc (GMED.US), and Teleflex Incorporated (TFX.US) as its highest-conviction stocks within the medical technology space. The brokerage has initiated coverage on this beaten-down sector, labeling it a buying opportunity.
In a research report issued on Wednesday, analyst Vik Chopra noted that the medtech sector is currently trading at approximately a 31% discount to its 10-year relative average, nearing its largest discount to the S&P 500 in a decade. Based on a BMO survey indicating robust hospital procedure demand, the analyst attributed the sector's weakness primarily to "capital flows and policy noise, not fundamentals." He stated that fundamentals appear "healthy, with Q1 results mostly exceeding expectations."
"We view medtech as an under-owned, undervalued sector suffering from a lack of marginal buyers as capital has rotated to AI/tech," Chopra wrote. He believes this dislocation presents a highly attractive opportunity to own "best-in-class corporate franchises" ahead of a potential valuation reset.
Key Analyst Ratings
He assigned Outperform ratings to Intuitive Surgical Inc (ISRG.US), Globus Medical Inc (GMED.US), Teleflex Incorporated (TFX.US), Align Technology Inc (ALGN.US), Stryker Corporation (SYK.US), Straumann Holding AG (SAUHY.US), Enovis Corp (ENVS.US), and Alphatec Holdings Inc (ATEC.US).
Market Perform ratings were given to GE HealthCare Technologies Inc (GEHC.US), Zimmer Biomet Holdings Inc (ZBH.US), Solventum Corp (SOLV.US), Henry Schein Inc (HSIC.US), Envista Holdings Corporation (NVST.US), CONMED Corporation (CNMD.US), Dentsply Sirona Inc (XRAY.US), and Integra LifeSciences Holdings Corporation (IART.US).
Analysis of Top Picks
Chopra stated that his "number one star stock," Intuitive Surgical Inc (ISRG.US), is currently trading at about a 31% discount to its three-year historical P/E multiple, despite having the strongest fundamental profile among its peers.
The analyst also highlighted Globus Medical Inc's (GMED.US) industry-leading margin expansion, attributing it partly to the company's acquisition of NuVasive last year.
Regarding Teleflex Incorporated (TFX.US), Chopra indicated that market consensus has not yet priced in an "inflection point" in the company's 2027 earnings per share (EPS), which could provide upside for the stock.
He set price targets of $518, $94, and $159 for these three companies, respectively.