8 healthcare stocks with healthy upside potential

The year 2023 was very unhealthy for healthcare stocks. This year, these stocks are more in line with the broader market. The sector has risen almost as much as the broader S&P500. Barron’s selects 8 shares in the healthcare sector with healthy price potential.

The Health Care Select Sector SPDR fund, which tracks healthcare stocks listed in the S&P500, is up 7.3% so far this year. That is slightly less than the 8.9% of the S&P500. The sector is off to a strong start this year, reflecting the change investors have made in their view of healthcare stocks.

Healthcare stocks were clearly out of favor in the year 2023. Investors mainly sought refuge in popular tech stocks, such as the Magnificent Seven. But the Fed provided a cure. Now interest rates are expected to fall and many healthcare shares are trading at favorable prices multiples are traded, investors are returning to healthcare.

Barron’s screened the S&P500 for healthcare stocks, whose average price targets are well above their recent closing prices. The researchers thus came up with eight stocks in which analysts see a lot of upside potential.

These include Biogen, Moderna and Incyte, but also Zoetis and UnitedHealth Group. A number of stocks are down year-over-year, including UnitedHealth and Biogen. Apparently investors don’t see the potential that analysts do. That makes their price earnings multiples attractive. Barrons zooms in on a few choices.

Insulet

Analysts have the highest expectations of Insulet. That company has launched a portable automatic insulin delivery system for diabetics. This year the stock is down 21.4%. The stock lost the most at the end of February, after the company issued forecasts that did not please investors.

In response, several analysts adjusted their price targets. So the projections of 38.7% upside potential may not yet fully take into account how far the stock has fallen.

Biogen

Biogen is number two on the list. The stock is down 16% this year and has an average price target that is 36.9% above its recent price. The results the company reported in February fell short of expectations.

Although the company’s new CEO says Biogen is ready to return to sustainable growth, investors seem unconvinced.

Moderna

Moderna’s average price target implies an upside potential of 22.8%. The stock fell dramatically last year when sales of the Covid-19 vaccine fell far short of expectations.

Analysts are now starting to look ahead again and have high hopes for the company’s respiratory syncytial virus vaccine. That vaccine could be launched this year. In addition, the cancer program provides expectations for the longer term.

UnitedHealth Group

Shares of UnitedHealth, one of the largest companies in the sector, are down about 6.3% from the start of the year. Yet analysts still see 20.8% potential upside. The shares are under pressure due to an antitrust investigation by the US Department of Justice and a hack of the subsidiary Change Healthcare.

Also read: The Promising Seven: tech stocks with groundbreaking innovations