Investing.com - At the start of every quarter, Deutsche Bank (ETR:DBKGn) presents its top investment ideas per sector to hold over the next twelve months. It’s the time for the healthcare sector to receive the spotlight.
The first member of the healthcare sector that Deutsche Bank gazes fondly at is Edwards Lifesciences (NYSE:EW), which has a ‘buy’ rating and $103 price target.
“Edwards represents one of the premier growth stories across large cap medtech over the next few years, with a steady flow of important pipeline catalysts over the next couple years to keep investors engaged,” analysts at Deutsche Bank said, in a note dated July 2.
“We are increasingly confident in Edwards’ ability to deliver +LDD [low double digit] revenue growth over the forecast period,” the bank said, “based primarily on improving visibility around the emerging TMTT segment where multiple innovative therapies holding game-changer potential are now in early commercial launch that address substantial patient populations with mitral and tricuspid valvular disease, where treatment rates are low despite their lethality given a paucity of therapeutic options.”
Icon (NASDAQ:ICLR) is the world's leading clinical research organisation, and Deutsche Bank has a ‘buy’ rating, with a $370 price target.
Icon “remains one of our top picks with: 1) upside to organic revenue growth and EPS; 2) margin expansion 40+ bps; 3) potential share repurchase and lower interest expense; and 4) potential multiple expansion given the stock is trading below the S&P 500 vs. its historical 15% premium,” Deutsche Bank said.
End-market fundamentals remain healthy, the German bank added, with large biopharma R&D on track to grow +low-SD [single digits] despite headline news around spending cuts. Biotech fundraising continues to improve, and our industry checks confirm healthy RFP [request for proposal] activity.
Pharmaceutical giant Merck & Company (NYSE:MRK) also has a ‘buy’ rating, with a price target of $140.
Merck’s Keytruda–a humanized antibody used in cancer treatment–has established itself as backbone for oncology treatment regimens that we believe provides solid growth visibility until FY2028, Deutsche said.
Keytruda’s success also positions it for Inflation Reduction Act selection in FY2028, but it also ensures Medicare volume. Its clinical data also provides a moat that may widen with early-stage data and combinations.
Furthermore, Vaccines and Animal Health provide durable free cash flows and some modest growth. Life cycle management is emerging, and a strong Winrevair [a medication used for the treatment of pulmonary arterial hypertension] launch provides near-to-midterm upside potential.
Repligen (NASDAQ:RGEN), a company devoted to the development and production of materials used in the manufacture of biological drugs, has a newly awarded ‘buy’ rating, with a $155 price target.
“We believe Repligen is best levered to the bioprocessing recovery given the 1) large margin expansion and top line growth opportunity; 2) product and commercial strategy to drive above market growth; 3) deeper bench strength from CEO transition and recent hires; and 4) recent underperformance with the stock down (41%) since its February peak.”
Tenet Healthcare (NYSE:THC) is another company with a ‘buy’ rating, and a price target of $155.
The for-profit multinational healthcare services company has been shifting from a highly levered, volatile company to a consistent, stable EBITDA grower over the past five years.
While this hasn’t gone completely unnoticed, exemplified by the 82% tear Tenet has gone on in the first six months of 2024 relative to just a 16% gain for the S&P 500, Deutsche Bank notes that the current multiple of 7.4x 2025 EBITDA is only 7% above Tenet’s 2-year and 7-year averages.
“Hence, we believe the market is under-appreciating the opportunity and not giving Tenet enough credit,” Deutsche Bank concluded.
Finally, healthcare and insurance company Cigna (NYSE:CI) Group has a ‘buy’ rating and a $370 price target.
Cigna raised long-term earnings growth guidance by 100 bps in March, while launching a new program around GLP1 drug access [used to treat diabetes and obesity] and its next competitive offering in the biosimilar Humira [used to treat rheumatoid arthritis] market.
“We believe the Cigma investment thesis is warranted by the growth of the more profitable commercial market,” said analysts at Deutsche Bank. “We believe the company has navigated the challenges in the core commercial business with good client retention level and new business wins.”