Analysts see big upside for these undervalued health care stocks.
After lagging the market in 2021, health care stocks have outperformed the S&P 500 in 2022. Some health care stocks are still experiencing tail winds from the COVID-19 pandemic, while others have benefited from a rebound in elective procedures. Health care stocks are an excellent defensive play in an environment of rising interest rates and economic uncertainty. The Centers for Medicare and Medicaid Services estimates U.S. health care spending will reach $6.8 trillion by 2030, providing excellent long-term investment opportunities. Here are 10 of the best health care stocks to buy in 2022, according to CFRA analysts.
UnitedHealth Group Inc. (ticker: UNH)
UnitedHealth is the largest U.S. managed health care company. Analyst David Holt says UnitedHealth’s expansion into several new Affordable Care Act state marketplaces will be a positive tail wind for the stock. In addition, he says UnitedHealth’s $8 billion acquisition of health care technology company Change Healthcare will improve the technology of UnitedHealth’s Optum unit and produce significant cost synergies. Holt projects 8% revenue growth in 2023 and says UnitedHealth’s long-term goal of 13% to 16% annual earnings growth is also within reach. CFRA has a “strong buy” rating and $650 price target for UNH stock, which closed at $535.04 on Dec. 5.
Pfizer Inc. (PFE)
Since the beginning of 2020, shares of COVID-19 vaccine maker Moderna Inc. (MRNA) are up more than 800% and shares of Pfizer’s COVID-19 vaccine partner BioNTech SE (BNTX) are up nearly 400%. Meanwhile, Pfizer shares are up just 38% over that same stretch. Investors may be disappointed with Pfizer’s underperformance, but analyst Stewart Glickman says Pfizer has a strong pipeline of drug candidates with the potential to generate $20 billion in revenues by 2030. Most pipeline candidates are being developed internally, suggesting Pfizer will not need to rely on acquisitions. CFRA has a “strong buy” rating and $62 price target for PFE stock, which closed at $50.73 on Dec. 5.
Merck & Co Inc. (MRK)
Merck is one of the world’s largest pharmaceutical companies. Merck recently reported 14% revenue growth in the third quarter, including 20% sales growth from leading cancer drug Keytruda. Sales for Merck’s HPV vaccine Gardasil were also up 15%. Glickman says Merck made the right call by spinning off its slower-growth Organon & Co. (OGN) business and focusing on key growth drivers. Glickman says Merck’s Molnupiravir oral COVID-19 treatment will be a near-term growth source, and Merck’s Acceleron Pharma acquisition will increase its exposure to the cardiovascular disease treatment market. CFRA has a “strong buy” rating and $116 price target for MRK stock, which closed at $110.01.
Abbott Laboratories (ABT)
Abbott Laboratories is a diversified health care company and a member of an exclusive club called the dividend aristocrats, a select group of S&P 500 stocks that have raised their dividends for at least 25 consecutive years. In December 2021, Abbott boosted its quarterly dividend by 4.4% from 45 cents to 47 cents per share, and now boasts a 1.8% dividend yield. Last year marked the 50th consecutive year Abbott investors have enjoyed a dividend hike. Analyst Colin Scarola says Abbott’s dividend growth is a major reason the stock will outperform peers in the long-term. CFRA has a “buy” rating and $110 price target for ABT stock, which closed at $105.41 on Dec. 5.
CVS Health Corp. (CVS)
CVS Health is the largest U.S. pharmacy-based health care provider. Analyst Arun Sundaram says CVS has a strong balance sheet, an attractive valuation and stable cash flows. In addition, he is bullish on the company’s transition from a drugstore pure play to a holistic health care provider. CVS now sells insurance, provides primary care services and manages prescription drugs. The company also recently acquired home health care provider Signify Health and eliminated a major overhang for the stock by agreeing to a $5 billion opioid litigation settlement. CFRA has a “buy” rating and $116 price target for CVS stock, which closed at $102.01 on Dec. 5.
Medtronic Plc (MDT)
Medtronic is a health care device manufacturer that operates in four segments: cardiovascular, medical surgical, neuroscience and diabetes. The company is planning to spin off its patient monitoring and respiratory interventions business as part of its plan to streamline its portfolio and focus on higher-growth sales. Scarola says Medtronic’s new product lineup differentiates it from competitors and is particularly bullish on its robotic-assisted surgery platform. Unfortunately, Medtronic recently reported that it missed the primary efficacy endpoint on its renal denervation system for reducing ambulatory systolic blood pressure. CFRA has a “buy” rating and $104 price target for MDT stock, which closed at $78.79 on Dec. 5.
Cigna Corp. (CI)
Cigna is one of the largest U.S. managed care organizations and pharmacy benefit managers. Sundaram projects strong long-term growth from its Cigna Healthcare and Evernorth divisions. He says the company also has several promising strategic initiatives, including growth in U.S. government services, international expansion, and digital, home and behavioral health care delivery. In addition, Cigna is investing in technological improvements. Sundaram says Cigna’s sale of its slow-growth disability and life unit was the right move, as it will allow the company to further deleverage its balance sheet in the coming years. CFRA has a “buy” rating and $370 price target for CI stock, which closed at $327.39 on Dec. 5.
Vertex Pharmaceuticals Inc. (VRTX)
Vertex Pharmaceuticals is a biopharmaceutical company that specializes in developing therapies to treat cystic fibrosis. Vertex shares have bucked the bearish market trend in 2022. The stock is up 44.6% year to date through Dec. 5, making it the best-performing stock on this list. Glickman says Vertex dominates the cystic fibrosis market, a business which helps fund the company’s expansion into non-core markets such as sickle cell disease and beta thalassemia. Glickman is particularly bullish on potential sickle cell disease cure CTX001. He projects 6.2% revenue growth for Vertex in 2023. CFRA has a “buy” rating and $352 price target for VRTX stock, which closed at $317.60 on Dec. 5.
Moderna Inc. (MRNA)
Moderna is a leading biotechnology company that specializes in mRNA therapeutics. Investors likely know of Moderna because of its popular COVID-19 vaccine, but Glickman says he’s bullish on the long-term potential for Moderna to expand its mRNA vaccine technology into other areas, including influenza, respiratory syncytial virus (RSV) and cytomegalovirus (CMV). Moderna shares are down nearly 40% in the past year, which Glickman says makes the stock attractively valued given Moderna will likely maintain a significant share of the global COVID-19 vaccine market share. CFRA has a “buy” rating and $219 price target for MRNA stock, which closed at $175.93 on Dec. 5.
Boston Scientific Corp. (BSX)
Boston Scientific is a medical device manufacturer that specializes in cardiovascular, rhythm management and medical-surgical equipment. Boston Scientific shares trade at just 23.9 times CFRA’s 2023 earnings estimate, which analyst Garrett Nelson says makes the stock attractively valued. He says the company’s recent product launches and strong development pipeline have it well-positioned for long-term growth. Nelson is optimistic about the company’s Watchman FLX left atrial appendage closure device, its Exalt-D single-use duodenoscope and its POLARx cryoablation system. He projects 7% overall revenue growth in 2023. CFRA has a “buy” rating and $48 price target for BSX stock, which closed at $45.42 on Dec. 5.
10 best health care stocks to buy for 2023:
— UnitedHealth Group Inc. (UNH)
— Pfizer Inc. (PFE)
— Merck & Co Inc. (MRK)
— Abbott Laboratories (ABT)
— CVS Health Corp. (CVS)
— Medtronic Plc (MDT)
— Cigna Corp. (CI)
— Vertex Pharmaceuticals Inc. (VRTX)
— Moderna Inc. (MRNA)
— Boston Scientific Corp. (BSX)
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10 Best Health Care Stocks to Buy for 2023 originally appeared on usnews.com
Update 12/06/22: This story was published at an earlier date and has been updated with new information.
