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Citi analysts made a series of changes in the firm’s coverage of Medical Supplies and Technology ahead of the Q3 earnings season.
Overall, they see “depressed” valuations in the MedTech sector with the S&P Equipment & Supplies index down 27.3% YTD.
“From a stock multiple perspective the 12-month forward P/E sits at 21.5x, almost where it was during the depths of the pandemic in March 2020, and well below the 5-year average. This is a strong statement given that the number of unknowns back in March 2020 were substantially higher than now, and it accentuates just how negative sentiment has turned on MedTech,” they wrote to clients.
The analysts also opened a positive catalyst on DexCom Inc (NASDAQ:DXCM) in anticipation of the G7 approval, as well as a negative catalyst watch on Nevro Corp (NYSE:NVRO).
Moreover, the analysts downgraded Penumbra (NYSE:PEN) to Neutral from Buy. The price target goes to $217 from $170 to reflect raised stock multiple.
“While we are believers in the company’s end markets and the pipeline, we are looking at a stock that has rebounded significantly even as multiples compress in an inflationary environment with rising interest rates. Thus we are stepping aside,” they added.
On the other hand, DXCM, Boston Scientific (NYSE:BSX), and NuVasive (NASDAQ:NUVA) are reiterated as Top Picks in the sector.
