While the Street’s sentiment on medical devices companies remains resoundingly negative, with a relatively bleak outlook already priced into many of the sector’s stocks, Lazard Capital Markets Senior Analyst Dr. Sean Lavin, M.D., says things aren’t as bad as the Street would lead many to believe.
“My overall take is that the sentiment on Wall Street, which is extraordinarily negative on at least medical devices, is probably more negative than what we’re actually seeing in health care services and procedures,” said Dr. Lavin, explaining that many of the stocks he covers are down 30% in procedural volume from three or four months ago. “We’ve certainly seen a bit of a slowdown in certain areas, such as spine surgery, which has certainly slowed down a few percentage points, some of the cardiac rhythm management names and the ICD space has slowed down a few percentage points, but I would say with the Street taking 20%-plus off of each of the related stock prices, this has far more than adjusted for the market slowdown with the economy.”
Specifically, Dr. Lavin points out the spine market slowed from 8% growth to 4%, while growth in the ICD market decreased from 4% to 3% — relatively small adjustments when compared to the large hits dealt to stocks.
“It’s kind of interesting that numbers are not really going lower except for a few companies, and yet sentiment in the whole space is still more negative than the valuation, and that’s a potential for a rally because at some point, investors look up and see that these earnings numbers are the same as they were three months ago when the stocks were 30% higher,” Dr. Lavin said. “I think it will start a buy rally. The question is how low do they go first?”
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