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Bernstein is bullish on medtech shares Thermo Fisher, Guardant Well being, Revvity and PacBio, however sees additional draw back for Illumina, in keeping with a brand new business observe.
The funding agency kicked off protection of the US life science instruments and diagnostics sector final week, asserting that the sub-sector had “vastly” outperformed the broader market regardless of some rockiness over the previous few quarters.
Bernstein attributed the latest weak spot partly to such elements as post-COVID stock de-stocking, financial issues in China and “cautiousness” in biopharma spending. Nevertheless it additionally mentioned {that a} correction was considerably anticipated given previous efficiency.
“In actuality, for an business that talks about roughly 4% to six% long-term core natural progress, we’ve been above that for years, so some correction/reversion to the imply isn’t stunning,” Bernstein analysts wrote of their observe dated Sept. 27.
The excellent news, Bernstein mentioned, is that the long-term demand drivers for the sub-sector “are nonetheless very a lot in place” and that the “shake-up” created a possibility for buyers to purchase long-term “winners” at a beautiful entry level and “make the most of short-term dynamics miserable share value.”
Topping Bernstein’s outperform listing for diversified toolmakers had been Thermo Fisher (NYSE:TMO) and Revvity (RVTY). The financial institution set Thermo’s value goal at $603 and Revvity’s at $133.
In the meantime, Bernstein rated Avantor (AVTR) at market carry out, commenting that regardless of excessive recurrent income and comparatively low publicity to China, it believed buyers “want time to recover from latest stumbles” and that the inventory’s a number of was “warranted.” Bernstein’s value goal for the inventory is $22.
Agilent (A) and Waters (WAT) had been additionally rated market carry out, with Bernstein asserting that it expects the slowdown within the demand for devices to proceed and that each firms have “restricted upside from main strategic actions.” Bernstein set a value targets of $123 for Agilent and $280 for Waters.
As for next-generation genomic sequencing, Bernstein mentioned it’s bullish on Pacific Biosciences (NASDAQ:PACB) however bearish on sub-sector large Illumina (NASDAQ:ILMN), due partly to a shift from short-read sequencing by synthesis, or SBS, which Illumina dominates, to a “extra aggressive panorama” that features applied sciences reminiscent of long-read sequencing.
Within the case of Illumina, Bernstein asserted that its “monopoly” was below assault, making it the relative “loser” within the area. Bernstein rated Illumina at underperform, regardless of a “big collapse” of its share value. “We predict there’s additional draw back,” Bernstein added, setting Illumina’s value goal at $111.
In the meantime, Bernstein mentioned it considered PacBio because the relative “winner,” stating that PacBio’s pipeline was set as much as seize market share in each the lengthy and short-read classes. “PacBio is at an enormous level of inflection in progress,” the funding agency added. Bernstein rated PacBio outperform, with a value goal of $11.
Guardant Well being (NASDAQ:GH) was Bernstein’s prime decide within the molecular diagnostics area, with the financial institution score it outperform with a value goal of $34. Citing Guardant’s “first-mover benefit,” Bernstein sees the corporate delivering “superior progress.” Bernstein added that it considered a latest pullback on the inventory as a shopping for alternative.
Bernstein was additionally bullish on Precise Sciences (EXAS), commenting that though the inventory could seem dear relative to friends, the “premium is justified” by the corporate’s decrease draw back danger and constructive money circulate. Bernstein rated Precise Sciences at outperform, with a $83 value goal.
Natera (NTRA), in the meantime, was labeled “thrilling,” however nonetheless given a market carry out score as Bernstein believes that the corporate’s minimal residual illness, or MRD, product is “additional away than the market appreciates.”
Bernstein warned buyers, nonetheless, to not quick Natera inventory as the corporate’s 22q screening might signify a $600M market alternative. The agency set its value goal for the inventory at $48.
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