On Wednesday, RBC Capital Markets provided insights into the Medical (TASE:PMCN) Supplies & Devices sector, projecting a favorable outlook for 2025.
The firm anticipates that the sector will experience a year of positive momentum, citing historical data that large-cap medical device stocks have typically outperformed by an average of 16 points during the first presidential year of the last six election cycles. This projection is set against the backdrop of an expected net positive impact from a Trump presidency and an increase in investor risk appetite compared to the previous year.
RBC Capital highlights 'quality with catalysts' stocks like Boston Scientific (NYSE:NYSE:BSX) and Intuitive Surgical (NASDAQ:ISRG), noting the entire coverage is catalyst-rich. Moreover, they recognize an increasing investor interest in moving down the valuation spectrum while still focusing on catalysts.
This approach identifies significant upside opportunities in stocks such as DexCom (NASDAQ:DXCM), Medtronic (NYSE:NYSE:MDT), and Edwards Lifesciences (NYSE:NYSE:EW), with DXCM being the most dislocated in the large-cap coverage.
The firm's proprietary surveys, involving 235 participants, support their bullish stance on several stocks. These surveys indicate strong potential catalysts and market growth for companies like Intuitive Surgical, with the expected full launch of the da Vinci (EPA:SGEF) 5 system by mid-2025, and Edwards Lifesciences, with anticipated market growth in transcatheter valve therapies.
RBC Capital also sees Boston Scientific as a leader within cardiology and Insulet (NASDAQ:PODD) Corporation (NASDAQ:INSP) as a dominant player in treating obstructive sleep apnea, benefiting from a significant first-mover advantage.
RBC Capital's top large-cap picks for 2025 include Abbott Laboratories (NYSE:NYSE:ABT), Boston Scientific, Stryker Corporation (NYSE:NYSE:SYK), and Intuitive Surgical. Their smid-cap selections feature Globus Medical (NYSE:NYSE:GMED), Penumbra (NYSE:NYSE:PEN), and Insulet Corporation.
They believe that stocks like DexCom, Medtronic, and Edwards Lifesciences offer the best value or potential upside, particularly those that are dislocated or have recently reset.
In conclusion, RBC Capital maintains a bullish view on the Medical Supplies & Devices sector for 2025, expecting it to outperform the Health Care Select Sector SPDR Fund (NYSEARCA:XLV) and the S&P 500 Index (SPX), driven by innovation, positive healthcare utilization trends, and a neutral impact from the Trump administration.
In other recent news, Inspire Medical Systems (NYSE:INSP) reported a robust third-quarter performance, with a 33% increase in revenue to $203.2 million and a net income of $18.5 million, a notable improvement from the previous year.
The company also raised its full-year 2024 revenue guidance to a range of $793-798 million, marking a 27-28% year-over-year increase. Truist Securities, Piper Sandler, and Baird have all responded positively to these developments, increasing their stock price targets for Inspire Medical.
The company is preparing for the soft launch of Inspire V in the fourth quarter, with a full-scale launch anticipated in 2025. This new product, along with other strategic efforts, is expected to alleviate existing capacity bottlenecks over time, further enhancing the company's growth prospects.
Analysts anticipate that Inspire Medical could achieve a 9-10% operating margin by 2026, based on high-teens revenue growth. The upcoming launch of the Inspire V neurostimulation system and the expansion of implanting centers and sales territories are expected to enhance the company's market position. These are among the recent developments contributing to the company's continued growth trajectory.
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