Analysts see big upside for these undervalued health care stocks.
Health care stocks have underperformed the S&P 500 in 2021, but analysts are optimistic that a handful of top health care names are positioned for a big year in 2022. Stocks exposed to the ongoing pandemic will experience more tail winds in the next couple of quarters, but the health care industry is expected to continue to normalize. Elective care has returned, high costs associated with COVID-19 patient care have subsided, and pharmaceutical and medical equipment stocks have begun to rebound. Here are 10 of the best health care stocks to buy in 2022, according to Wall Street analysts.
UnitedHealth Group Inc. (ticker: UNH)
UnitedHealth is the largest U.S. managed health care firm. Bank of America analyst Kevin Fischbeck says every UnitedHealth segment is reporting impressive growth numbers, and the company’s overall guidance for 2022 appears to be conservative. Fischbeck says the market doesn’t fully appreciate UnitedHealth’s earnings power, and OptumHealth will continue to be the company’s engine for long-term growth. Beyond its OptumCare clinics, UnitedHealth plans to double its value-based home and community care business in 2022. The company’s data analytics business OptumInsight is also expanding its margins. Bank of America has a “buy” rating and $522 price target for UNH stock, which closed at $494.13 on Dec. 22.
Pfizer Inc. (PFE)
Pfizer is one of the world’s largest pharmaceutical companies. The company has also produced one of the most effective and popular vaccines for COVID-19. CFRA analyst Sel Hardy says the expansion of regulatory approval for Pfizer’s vaccine to younger age groups and the Centers for Disease Control and Prevention’s recommendation for vaccine boosters six months after initial doses are bullish tail winds for Pfizer’s business. Hardy says generic competition will eat into Lyrica and Enbrel sales in the near term, but strong growth in Pfizer’s oncology portfolio will balance that slowdown. CFRA has a “strong buy” rating and $57 price target for PFE stock, which closed at $59.55 on Dec. 22.
SpringWorks Therapeutics Inc. (SWTX)
SpringWorks Therapeutics is a clinical-stage biopharmaceutical company focused on rare diseases and cancer. JPMorgan analyst Anupam Rama says top-line phase 3 desmoid/fibromatosis, or DeFi, trial data for leading asset nirogacestat should be released by early 2022, a “potentially transformative catalyst” for the stock. Rama says there is a high probability of success in the DeFi trial, and the market is not fully appreciating the potential for desmoid tumor treatment demand. JPMorgan physician survey results suggest nirogacestat could quickly emerge as a standard of care, assuming positive trial data. JPMorgan has an “overweight” rating and $107 price target for SWTX stock, which closed at $70.99 on Dec. 22.
Incyte Corp. (INCY)
Incyte is a biotechnology company focused on oncology. Morningstar analyst Karen Andersen says Incyte shares are undervalued and the company’s latest drug launches have it positioned to continue to generate double-digit annual revenue. Andersen is particularly bullish on the launches of Jakafi in treating chronic graft-versus-host disease, topical Opzelura in treating atopic dermatitis and Minjuvi in treating blood cancer. Jakafi sales grew 12% to $547 million in the third quarter, and the company has guided for $1.5 billion in peak Opzelura sales. Morningstar has a “buy” rating and $116 fair value estimate for INCY stock, which closed at $73.37 on Dec. 22.
Thermo Fisher Scientific Inc. (TMO)
Thermo Fisher Scientific produces and sells analytical instruments and provides life sciences services. Bank of America analyst Derik de Bruin recently met with Thermo Fisher management and says the company is optimistic about its near-term financial outlook. Management is projecting $450 million in COVID-19 testing revenue in the fourth quarter and another $750 million in testing sales in fiscal 2022, an estimate de Bruin says may be conservative. Thermo Fisher is also projecting about $2 billion in COVID-19 vaccine revenue in fiscal 2022. Bank of America has a “buy” rating and $680 price target for TMO stock, which closed at $651.70 on Dec. 22.
Merck & Co. Inc. (MRK)
Merck is one of the world’s largest pharmaceutical companies and leading vaccine producers. Hardy says his bullish outlook got a boost when the Food and Drug Administration recently granted emergency use authorization to Merck’s COVID-19 oral drug molnupiravir. In addition, Hardy says the Acceleron acquisition could be a significant growth driver for Merck by contributing to the depth of its portfolio and expanding its presence in the cardiovascular disease treatment market. Finally, Hardy says the spinoff of Organon will generate $1.5 billion in operating efficiency by 2024. CFRA has a “strong buy” rating and $97 price target for MRK stock, which closed at $76.16 on Dec. 22.
Seagen Inc. (SGEN)
Seagen is a biotech company focused on cancer therapies. Cory Kasimov, biotech analyst at JPMorgan, says Seagen provides an opportunity for investors to take a diversified approach to commercial oncology. Following the recent approval of Seagen’s Tivdak in September, the company now has four different oncology products on the market. In addition to the cash flow from Seagen’s commercial products, Kasimov says the company’s early-stage pipeline also gives Seagen optionality and potentially bullish near-term catalysts. Phase I data on SEA-CD40 in treating pancreatic cancer is expected in early 2022. JPMorgan has an “overweight” rating and $201 price target for SGEN stock, which closed at $156.78 on Dec. 22.
Zimmer Biomet Holdings Inc. (ZBH)
Zimmer Biomet produces orthopedic and musculoskeletal implants. Morningstar analyst Debbie Wang says Zimmer Biomet is the gold standard in large joint reconstruction, but the COVID-19 pandemic continues to pressure elective surgeries. In the longer term, Wang says Zimmer should benefit from several positive demographic trends, including an aging baby boomer population and rising obesity rates. Wang says Zimmer has a two-pronged strategy that includes cultivating relationships with orthopedic surgeons and accelerating growth via product innovation. She says high switching costs provide a competitive moat for Zimmer Biomet. Morningstar has a “buy” rating and $192 fair value estimate for ZBH stock, which closed at $124.73 on Dec. 22.
Eli Lilly & Co. (LLY)
Eli Lilly is a brand-name prescription drug producer. Bank of America analyst Geoff Meacham says Eli Lilly reported impressive 11% revenue growth and 18% earnings growth in fiscal 2021, and the company is positioned to continue that momentum in 2022. Meacham says Eli Lilly should gain regulatory approvals for both Tirzepatide for diabetes and Donanemab for Alzheimer’s disease and commercially launch both drugs in 2022. While slowing COVID-19 antibody sales will weigh on growth, Meacham is still projecting 3% revenue growth in the year ahead. Bank of America has a “buy” rating and $285 price target for LLY stock, which closed at $266.50 on Dec. 22.
BioMarin Pharmaceutical Inc. (BMRN)
BioMarin is a biotech company developing treatments for serious rare diseases and medical conditions. The company’s drug Voxzogo was approved in the U.S. in November, and Kasimov says both Voxzogo and Roctavian have key clinical and regulatory catalysts coming in the near future. BioMarin is expected to report two-year phase 3 data on Roctavian in early 2022, which could jump-start the stock. Kasimov is also anticipating a Committee for Medicinal Products for Human Use opinion on Roctavian by mid-2022, another catalyst that should improve BioMarin investor sentiment. JPMorgan has an “overweight” rating and $135 price target for BMRN stock, which closed at $89.95 on Dec. 22.
Here are the 10 best health care stocks to buy for 2022:
— UnitedHealth Group Inc. (UNH)
— Pfizer Inc. (PFE)
— SpringWorks Therapeutics Inc. (SWTX)
— Incyte Corp. (INCY)
— Thermo Fisher Scientific Inc. (TMO)
— Merck & Co. Inc. (MRK)
— Seagen Inc. (SGEN)
— Zimmer Biomet Holdings Inc. (ZBH)
— Eli Lilly & Co. (LLY)
— BioMarin Pharmaceutical Inc. (BMRN)
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