Analysts see big upside for these undervalued health care stocks.
After lagging behind the market in 2021, health care stocks have outperformed the S&P 500 so far in 2022. Some health care stocks are still experiencing tail winds from the pandemic, while others are benefiting from a rebound in elective procedures. Health care stocks are an excellent defensive play in an environment of rising interest rates and economic uncertainty. Health care valuations are also attractive, with pharmaceutical stocks and biotech stocks currently trading at record valuation discounts to other defensive sectors. Here are 10 of the best health care stocks to buy in 2022, according to Wall Street analysts.
Beam Therapeutics Inc. (ticker: BEAM)
Beam Therapeutics is a company that uses the gene-editing tool CRISPR to change single bases in the genome with a technique called base editing. Beam is currently transitioning into the clinical development stage with its phase 1/2 clinical trial of its BEAM-101 treatment of sickle cell disease beta thalassemia. Bank of America analyst Greg Harrison says investors should expect Beam’s BEAM-102 treatment for sickle cell disease and BEAM-201 treatment for T-cell acute lymphoblastic leukemia to enter clinical testing soon as well. Bank of America has a “buy” rating and a $154 price target for BEAM stock, which closed at $40.03 on May 3.
Fate Therapeutics Inc. (FATE)
Fate Therapeutics is a clinical-stage biotech company developing cell therapies using pluripotent stem cells. Bank of America analyst Tazeen Ahmad is focused on Fate’s FT596 plus R-CHOP trial and updates on the durability data for its FT516 therapy. FT596 is currently being tested for treatment of B-cell lymphoma and chronic lymphocytic leukemia in combination with CD20 monoclonal antibodies. FT516 is in phase 1 trials for treatment of acute myelogenous leukemia and B-cell lymphoma in combination with CD20 monoclonal antibodies. Ahmad says investors should expect an update on FT516 and FT596 in the second half of the year. Bank of America has a “buy” rating and a $112 price target for FATE stock, which closed at $28.78 on May 3.
Catalent Inc. (CTLT)
Catalent specializes in advanced delivery technologies and development solutions for drugs and consumer and animal health products. Catalent helps customers produce small molecule and biologic drugs for a wide range of uses, from clinical trials to commercial sales. Catalent got a big demand boost during the pandemic when it signed deals to help produce the Arcturus Therapeutics Holdings Inc. (ARCT) and Johnson & Johnson (JNJ) COVID-19 vaccine candidates. Bank of America analyst Derik de Bruin says the outlook for bioprocessing remains bullish, even after pandemic demand dies down. Bank of America has a “buy” rating and a $150 price target for CTLT stock, which closed at $99.95 on May 3.
CRISPR Therapeutics AG (CRSP)
CRISPR Therapeutics is a biotech company that uses the gene-editing tool CRISPR-Cas9 for blood disorder and cancer applications. CRISPR has three 100%-owned gene-editing therapies in clinical trials and is co-developing two other therapies with partners Vertex Pharmaceuticals Inc. (VRTX) and ViaCyte Inc. Bank of America analyst Geoff Meacham says CRISPR is a high-risk stock with tremendous potential upside given the traction its technology platform is gaining. He says the stock has several upcoming catalysts, making it a biotech “name to own” in 2022. Bank of America has a “buy” rating and a $175 price target for CRSP stock, which closed at $52.62 on May 3.
Roche Holding AG (RHHBY)
Roche is a global pharmaceuticals and diagnostics producer based in Switzerland. Morningstar analyst Karen Andersen says Roche’s industry-leading diagnostics technology and its impressive drug portfolio have created a competitive advantage for the company. Andersen says Roche’s focus on biologics, which account for more than 80% of pharmaceutical sales, helps the company combat the sharp declines in drug sales that typically occur when generic drug competition hits the market. She says Roche is the market leader in in vitro diagnostics and holds 20% of the global market share. Morningstar has a “buy” rating and a $58 fair value estimate for RHHBY stock, which closed at $45.13 on May 3.
Veeva Systems Inc. (VEEV)
Veeva Systems provides specialized cloud-based software solutions to address operating and regulatory challenges within the life sciences industry. Morningstar analyst Dylan Finley says labor market constraints will weigh on growth in the first half of 2022, but he says the stock’s nearly 30% decline so far this year has made it increasingly attractive from a valuation perspective. Finley says Veeva’s target of $3 billion in annual revenue by 2025 is within reach, and the company’s electronic trial master file software has secured several new contract wins. Morningstar has a “buy” rating and a $275 fair value estimate for VEEV stock, which closed at $183.70 on May 3.
Grifols SA (GRFS)
Grifols manufactures blood plasma-derived therapies. The pandemic weighed on the company’s plasma supply in 2021, but it is in a better position in 2022. Even in a difficult environment, Andersen says Grifols’ aggressive acquisition strategy, including its pending Biotest buyout, has allowed the company to increase its U.S. and European plasma collection by 4% over the past three quarters. Grifols is anticipating that plasma supply growth will accelerate in 2022, which Andersen says will boost manufacturing efficiency and help expand margins to 30% by 2026. Morningstar has a “buy” rating and a $17.10 fair value estimate for GRFS stock, which closed at $11.15 on May 3.
UnitedHealth Group Inc. (UNH)
UnitedHealth is the largest U.S. managed health care company. CFRA analyst Paige Meyer says UnitedHealth’s plans to expand Affordable Care Act exchange offerings in seven states is a positive catalyst. In addition, Meyer says regulatory approval of UnitedHealth’s $8 billion buyout of health care technology firm Change Healthcare would be bullish news for investors. Meyer says the combination of UnitedHealth’s Optum health care services business and Change Healthcare’s technology would generate significant cost synergies. Meyer projects 11% revenue growth for UnitedHealth in 2022. CFRA has a “strong buy” rating and a $665 price target for UNH stock, which closed at $499.62 on May 3.
Pfizer Inc. (PFE)
In the past two years, shares of COVID-19 vaccine maker Moderna Inc. (MRNA) and Pfizer’s COVID-19 vaccine partner BioNTech SE (BNTX) have roughly tripled in price. Meanwhile, Pfizer shares have lagged behind the S&P 500 over that same stretch. Investors may be disappointed with the vaccine’s lack of impact on Pfizer shares, but CFRA Research analyst Stewart Glickman says there are plenty of other good reasons to like the stock. Glickman says Pfizer’s recently announced buyout of ReViral is a low-risk bet on the underserved respiratory syncytial virus market. CFRA has a “strong buy” rating and a $71 price target for PFE stock, which closed at $49.29 on May 3.
Merck & Co. Inc. (MRK)
Merck is one of the world’s largest pharmaceutical companies. Merck recently reported $3.2 billion in sales of its oral COVID-19 antiviral treatment molnupiravir in the first quarter. Its Keytruda cancer treatment and Gardasil HPV vaccine were other major growth drivers in the quarter. Management guided for 2022 revenue growth of between 17% and 19%. Even after excluding molnupiravir sales, Glickman says Merck generated impressive 19% revenue growth last quarter. He says Merck’s focus on oncology, cardiovascular disease and vaccines is a winning recipe for long-term investors. CFRA has a “strong buy” rating and a $100 price target for MRK stock, which closed at $87.10 on May 3.
10 best health care stocks to buy for 2022:
— Beam Therapeutics Inc. (BEAM)
— Fate Therapeutics Inc. (FATE)
— Catalent Inc. (CTLT)
— CRISPR Therapeutics AG (CRSP)
— Roche Holding AG (RHHBY)
— Veeva Systems Inc. (VEEV)
— Grifols SA (GRFS)
— UnitedHealth Group Inc. (UNH)
— Pfizer Inc. (PFE)
— Merck & Co. Inc. (MRK)
More from U.S. News
3 Best Investments for Inflation
7 Best Water Stocks and ETFs to Buy
10 Best Health Care Stocks to Buy for 2022 originally appeared on usnews.com
Update 05/04/22: This story was published at an earlier date and has been updated with new information.
