Analysts Issue New Ratings on Large Health Care Stocks

Several analysts started coverage of Moderna. Stryker and Bausch Health were upgraded, while Hologic and Ultragenyx Pharmaceutical were downgraded

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Analysts took action on large health care stocks on Wednesday.

Several analysts started coverage of Moderna Inc. (MRNA, Financial), a biotechnology company that focuses on developing drugs based on messenger RNA.

  • Goldman Sachs gave the stock a buy rating and established a price target of $25 per share.
  • JPMorgan Chase initiated coverage with an overweight rating, setting a price target of $22.
  • Piper Jaffray gave it an overweight rating, setting a $24 price target.
  • Oppenheimer gave it an outperform rating, setting a price target of $27.

Founded in 2010, Moderna is headquartered in Cambridge, Massachusetts. The company reported $205.8 million in revenue and a loss of $269.8 million in 2017. The cash flow statement highlights outflows of nearly $343 million over the last 12 months of operations through the third quarter of 2018.

The company's balance sheet appears to be strong with total cash of $1.07 billion, or $16.2 per share, and total debt of $27 million, of which 85% is invested in short-term securities. GuruFocus has assigned a moderate financial strength rating of 5 out of 10. The company is not distributing a dividend because, despite the huge amount of cash available on hand, it is still striving to make a profit. In regard to profitability and growth, GuruFocus has assigned a 2 out of 10 rating.

On Wednesday, shares of Moderna closed at $15.33 on the Nasdaq for a market capitalization of $5.04 billion. The share price has declined 18.5% and outperformed the stock market by 13.5% for the 52 weeks through Jan. 2. The closing share price on Wednesday was 6.2% above the 52-week low of $14.44 and nearly 86% below the 52-week high of $28.45.

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Piper Jaffray also upgraded shares of Bausch Health Companies Inc. (BHC, Financial) to overweight and raised the price target to $27 per share from $22. Bausch Health is a Canadian developer, producer and marketer of pharmaceuticals, medical devices and over-the-counter products that are used in therapeutic areas of eye health, dermatology and gastroenterology.

Following Piper Jaffray’s rating, the average of 14 estimates is now $29.86 per share, reflecting 47.6% upside from the closing share price of $20.23 on Wednesday for a market capitalization of $7.05 billion.

The share price declined 12% for the 52 weeks through Wednesday and is below the 50-, 100- and 200-day simple moving average lines. The 52-week range is $14.44 to $28.45.

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Despite a drop in 2017, total revenues have grown over the last 10 years. GuruFocus has assigned an 8 out of 10 rating to the company's profitability and growth and a 3 out of 10 rating for its financial strength.

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The stock has a price-book ratio of 2.34 versus an industry median of 2.64 and a price-sales ratio of 0.89 versus an industry median of 3.1.

According to the Peter Lynch chart, it appears the stock may be undervalued.

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Evercore ISI upgraded Stryker Corp. (SYK, Financial) to outperform from the previous rating of in line with the market.

The stock has a recommendation rating of 2 out of 5 and an average target price of $187.48 per share. The rating is the average of 27 estimates, ranging from $170 to $212, and reflects 21.3% growth from the closing share price of $154.5 on Wednesday.

The stock decreased 3% in a year and is now trading below the 200-, 100- and 50-day SMA lines.

The stock has a market capitalization of $57.8 billion, a price-book ratio of 5.86 versus an industry median of 3.06, a price-sales ratio of 4.43 versus an industry median of 3.15 and a price-earnings ratio of 47.69 compared to an industry median of 30.17.

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Stryker is increasing total revenues at a 2.2% average pace per year computed over the last five years. Each business segment is driving total sales, which, in the third quarter of 2018, jumped 8% year over year to $3.24 billion. Revenue produced a net income of $590 million and a cash flow from operations of $618 million. The bottom line and operating cash flow were 36% and 682% higher than the prior-year quarter. The orthopaedics, medical surgery and neurotechnology and spine segments are contributing 35%, 45% and 20% to total sales.

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The balance sheet is robust, and the company is allocating a fraction of free cash flow to dividend payments of 52 cents per share.

The stock has a price-earnings ratio of 47.69 and a forward price-earnings ratio of 19.61 compared to industry medians of 30.17 and 25.06.

Morgan Stanley downgraded Hologic Inc. (HOLX, Financial) to underweight from equal-weight. Hologic is a medical technology company that develops, produces and supplies medical imaging systems, diagnostics products and surgical products.

After Morgan Stanley’s downgrade, Hologic now has a recommendation rating of 2.3 out of 5. The firm did not revise the price target, so stock is expected to trade at $45.09 per share, which reflects 17.4% upside from the closing share price of $38.42 on Wednesday.

The stock declined 12% in 2018 and is now trading below the 50-, 100- and 200-day SMA lines. Supported by an $11.11 billion market cap, the stock has a price-book ratio of 4.3 versus an industry median of 3.45 and a price-sales ratio of 3.3 compared to an industry median of 3.48.

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GuruFocus rated Hologic's profitability and growth 7 out of 10, but its financial strength has a moderate rating of 5 out of 10.Ă‚

Raymond James Financial downgraded shares of Ultragenyx Pharmaceutical Inc. (RARE, Financial) to market perform from outperform. Ultragenyx Pharmaceutical is an American biopharmaceutical company that focuses on developing products for the treatment of rare and ultra-rare genetic diseases.

Founded in 2010, Ultrageny is headquartered in Novato, California.

Ultragenyx now has a recommendation rating of 1.9 out of 5 and a price target of $70.53 per share, reflecting 69% upside from the closing share price of $41.72 on Wednesday.

The stock has fallen 18% for the 52 weeks through Wednesday and is now trading below the 50-, 100- and 200-day SMA lines. The market capitalization is $2.11 billion and the closing share price on Wednesday was 11.4% above the 52-week low of $37.44 and 118% below the 52-week high of $90.98. The price-book ratio is 3.16 versus an industry median of 4.1 and the price-sales ratio is 54.53.

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Despite haveing a solid balance sheet, which GuruFocus rated with the highest score of 10 for financial strength, the company still has a very low profitability and growth rating of 2 out of 10 since Hologic is not generating earnings yet.

Disclosure: I have no positions in any securities mentioned in this article.

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