Morgan Stanley upgrades key MedTech stocks amid mixed outlook
- Morgan Stanley maintains a bullish perspective on the MedTech industry, expecting strong demand and growth potential into 2025.
- They have upgraded Intuitive Surgical and Stryker to 'Overweight', citing promising indicators for both companies despite some operational challenges.
- The overarching outlook for the MedTech sector remains favorable, although caution is warranted regarding specific companies facing distinct challenges.
In recent months, Morgan Stanley has assessed the U.S. MedTech sector's outlook as 'Attractive' despite unexpected challenges that arose in 2024. Factors such as DexCom's unexpected Q2 channel mix challenges, a slowdown in TAVR procedures for Edwards Lifesciences, seasonal impacts affecting TransMedics, and an investigation into iRhythm Technologies contributed to this nuanced view of the sector. Nonetheless, Morgan Stanley remains optimistic about the broader MedTech industry, highlighting strong volumes and product pipelines leading into 2025, while indicating that the sector is less likely to face significant delays from FDA regulatory processes compared to other healthcare sectors. It has made specific upgrades, moving Intuitive Surgical and Stryker to 'Overweight' due to expected strong demand and market growth. Intuitive Surgical is projected to benefit from the success of its Da Vinci Dv5 system, while Stryker’s backlog and ongoing mergers and acquisitions position it for growth despite some uncertainties in orthopedic procedure volumes. Additionally, they initiated coverage on Procept BioRobotics, upgraded Tandem Diabetes, and adjusted ratings for Glaukos and Nevro due to differentiated performance and growth potentials. Overall, while caution is advised for specific stocks like Nevro and Glaukos, the overall outlook for the MedTech sector remains favorable as it heads into 2025.