When the market is expensive and overbought like the current one is, it is very important to stay with companies that not only have solid earnings potential but also have upcoming catalysts that can help move the shares higher. One space that could be primed for positive news and developments is medical technology, and for growth investors with a long-term horizon, there is some outstanding value to be found.
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A new BofA Securities research report zeroes in on four companies the firm feels have some very positive upcoming catalysts that should surface in the next three to six months. The report said this:

Exiting fourth quarter calls we are highlighting our best ideas / key learnings. We have two main calls. Four companies have potential meaningful catalysts coming over the next 3-6 months. Second, In March and April we are highly likely to see a real recovery in surgical procedure volumes but procedure based medtech names continue to trade at 10 year relative valuation lows. Our core call on the group therefore remains the same – Reiterate our Buy rating on discounted procedure based medtech.

While all four stocks are rated Buy at BofA Securities, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.

Axonics

This stock is more off the radar but offers an outstanding entry point. Axonics Modulation Technologies Inc. (NASDAQ: AXNX) has developed a rechargeable sacral neuromodulation (SNM) system that treats patients with overactive bladder, fecal incontinence or urinary retention by delivering mild electrical pulses to the sacral nerve to restore normal communication to and from the brain. The company’s r-SNM system is the only rechargeable SNM device, is 60% smaller than the device offered by its only competitor and only needs to be replaced every 15 years.

BofA Securities noted this about the company:

We attended (virtually) the SUFU meeting last weekend where doctors discussed the company’s new Bulkamid technology. Feedback was outstanding. We see as much as 15-20% upside risk to consensus numbers in 2021 and 2022. Hence Axonics has both 15-20% upside to numbers and also could see a 3-5 point increase in its forward multiple this year in our view.

The firm’s price target for the shares is $65, and the Wall Street consensus target is right in line at $65.33. The shares closed on Wednesday at $56.45 a share, which was up almost 4% into a very bad tape.

Becton Dickinson

This top health care company is a solid and safe play now. Becton Dickinson and Co. (NYSE: BDX) is a diversified global medical technology company that produces medical devices, instrument systems and reagents for the health care, life sciences research, clinical, diagnostic and pharmaceutical markets.

Becton Dickinson, or BD as it is often known, has grown into a large medical conglomerate with over 49,000 employees covering nearly 50 countries worldwide. The CareFusion acquisition in 2015 significantly expanded the company’s medical technology footprint in infusion and medication management.
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The analysts said this about the health care giant’s potential:

On the upcoming second quarter call we see the potential for a beat and raise; good news on Alaris (FDA filing for approval) and the possibility of directional 2022 guidance on EPS. These events could restore credibility, clear away concerns about next year and increase conviction in upside to numbers.

Shareholders receive a 1.35% dividend. The BofA Securities has a price target of $290, while the posted consensus target is $281.57. Becton Dickinson stock closed trading at $241.66 per share on Wednesday.

Dexcom

This stock has been on a roll and looks to have more upside potential. Dexcom Inc. (NASDAQ: DXCM) operates as a medical device company focused on the design and development of continuous glucose monitoring systems for people with diabetes.

The company has developed a small implantable device that continuously measures glucose levels in subcutaneous tissue just under the skin. Real-time data is processed and displayed and patients are also alerted when levels are too high or too low. Dexcom’s products are marketed to physicians, endocrinologists and diabetes educators.

The analysts are very positive on the potential for an advertising tailwind for the company, and the report noted this:

A key emerging theme in medtech is the power of direct to consumer advertising (DTC). Recent campaigns have worked and worked quickly. We expect to see DTC work for Dexcom on the heels of their recent super bowl commercial. We also note that it only took Abbot two and a half months to get a CE mark for Libre 3 after filing. We expect the company to file for CE Mark for G7 very shortly suggesting approval could come as early as Summer. G7 approval in Europe and upside to Street numbers suggest an upward bias over the next 3-6 months.

Note that the CE mark appears on many products traded on the extended single market in the European Economic Area. They signify that products sold in the area have been assessed to meet high safety, health and environmental protection requirements.

The massive $500 BofA Securities price target for Dexcom stock compares with the $467.56 consensus target and Wednesday’s $368.70 close, which was down almost 6% for the day.

This medtech giant is a solid pick for investors looking for a safe position in the health care sector, and it is a top pick for 2021. Medtronic PLC (NYSE: MDT) develops, manufactures, distributes and sells device-based medical therapies to hospitals, physicians, clinicians and patients worldwide. It operates in four segments: Cardiac and Vascular Group, Minimally Invasive Therapies Group, Restorative Therapies Group and Diabetes Group.
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The company announced earlier this summer that Blackstone’s life sciences division would invest $337 million into the research and development of its diabetes device technologies. Under the terms of the agreement, Medtronic will receive funding for four diabetes programs over the next several years. Medtronic’s engineering, clinical and regulatory teams will conduct the development work for the programs.

The analysts have loved the company for years:

Medtronic has the best outlook for catalysts over the next few months (March to October) of any large cap name we follow. We see 2-4 points of multiple expansion and 20% upside in the stock this year.

Investors in Medtronic stock receive a 1.97% dividend. The BofA Securities price target is $150. The posted consensus target is down at $133.54, but the stock closed most recently at $117.95 per share.

These four top companies are all poised to have some potential positive news and developments in the not too distant future. All their stocks could be good additions to growth portfolios looking to add medical technology positions.

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