In this article, we will discuss the 12 Best Healthcare Stocks to Buy According to Analysts.
McKinsey reported that, since 2019, the US healthcare industry witnessed significant financial pressure. This is evidenced by the fact that industry EBITDA as a proportion of the National Health Expenditure has declined by an estimated 150 bps (basis points). This fall has impacted payers and providers. Notably, the payers’ estimated margins in 2024 might be at their lowest levels in a decade. While providers have been facing labor shortages, the inflationary pressures have not yet been fully absorbed in the broader healthcare system.
Amidst these past trends, what does the future hold?
What Lies Ahead for the US Healthcare Industry?
McKinsey believes that the healthcare players need to consider potential policy and regulatory changes that can take place in the coming years due to the 2025 change in federal government administration. Furthermore, the industry continues to undergo a shift in growth dynamics. Health services and technology (HST) revenue pools are projected to increase at an 8% CAGR from 2023 to 2028, courtesy of the double-digit growth in software platforms and advanced data and analytics via sales of innovative technologies (such as generative AI) to providers and payers.
Furthermore, pharmacy services can see continued growth, mainly those having a focus on specialty pharmacy. Growth is expected to be fueled by increased utilization and new therapy launches, says McKinsey. Notably, specialty pharmacy revenue is projected to rise at an 8% CAGR from 2023 to 2028, boosting EBITDA for specialty pharmacies and managed service providers.
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Growth Drivers in the Healthcare Industry
McKinsey estimates that healthcare EBITDA is expected to increase by 7% CAGR to $987 billion in 2028 from a baseline of $676 billion in 2023. In many segments, the improvement is expected to be backed by recovery from post-pandemic lows, while in other areas (such as HST and specialty pharmacy), growth is projected to be faster. Software platforms have a key role in the healthcare ecosystem, allowing providers and payers to be more efficient in a complex environment.
Technological innovation (such as generative AI and machine learning) continues to create opportunities for stakeholders throughout segments via automating workflows, promoting data connectivity, and generating actionable insights. McKinsey further added that specialty pharmacy revenue is expected to experience rapid growth because of higher utilization and pipeline expansion (such as in oncology). The increased use of specialty drugs continues to expand specialty pharmacy profit pools.
With this in mind, we will now have a look at the 12 Best Healthcare Stocks to Buy According to Analysts
A healthcare professional wearing a lab coat, holding a vial of medication.
Our Methodology
To list the 12 Best Healthcare Stocks to Buy According to Analysts, we used a screener and filtered out the companies catering to the healthcare sector. Next, we chose the stocks that analysts saw the most upside to. Finally, the stocks were arranged in ascending order of their average upside potential, as of February 4. We also mentioned hedge fund sentiments around each stock, as of Q3 2024.
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12 Best Healthcare Stocks to Buy According to Analysts
12) BridgeBio Pharma, Inc. (NASDAQ:BBIO)
Number of Hedge Fund Holders: 46
Average Upside Potential: 43.9%
BridgeBio Pharma, Inc. (NASDAQ:BBIO) is a commercial-stage biopharmaceutical company, engaged in discovering, creating, testing, and delivering transformative medicines to treat patients suffering from genetic diseases and cancers. On January 14, TD Cowen analyst Tyler Van Buren maintained a bullish stance on the company’s stock, giving a “Buy” rating. The analyst’s optimism revolves around several factors, including the promising initial launch performance of BridgeBio Pharma, Inc. (NASDAQ:BBIO)’s product, Attruby.
The analyst believes that the robust sales potential and market reception of Attruby are expected to help BridgeBio Pharma, Inc. (NASDAQ:BBIO). On November 22, 2024, the US FDA approved Attruby (acoramidis), and since then, the company has seen strong momentum with 430 patient prescriptions written by 248 physicians. Elsewhere, BofA increased the company’s price objective to $45 from $42, maintaining a “Buy” rating after the FDA approval.
BridgeBio Pharma, Inc. (NASDAQ:BBIO) has also showcased a proactive approach to maximizing the value of its assets with the help of strategic partnerships and ventures. The company has debuted its newest venture—GondolaBio, a biopharma startup. It will focus on developing therapies for genetic and rare diseases.
11) BioMarin Pharmaceutical Inc. (NASDAQ:BMRN)
Number of Hedge Fund Holders: 54
Average Upside Potential: 46.3%
BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) is engaged in the development and commercialization of therapies for people suffering from serious and life-threatening rare diseases and medical conditions. JPMorgan reiterated an “Overweight” rating on the company’s stock, providing a price target of $109 after the company’s presentation at the JPMorgan Healthcare Conference. The presentation revolved around key goals from a commercial and clinical perspective. As per the analyst, BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) reiterated achieving ~$4 billion in total revenue in 2027 and a low-to-mid 40% adjusted operating margin, starting with 40% in 2026.
JPMorgan believes that the company’s stock is undervalued at current levels, possessing a durable base business and potential for strong operating margin expansion over the upcoming few years. VOXZOGO, BioMarin Pharmaceutical Inc. (NASDAQ:BMRN)’s treatment for achondroplasia, remains a standout performer in its portfolio. Since supply constraints are now resolved, there is healthy potential for strong growth and label expansion.
BioMarin Pharmaceutical Inc. (NASDAQ:BMRN) highlighted strong global demand for VOXZOGO, resulting in more than 3,800 infants and children receiving treatment at the end of Q3 2024. In the US, the majority of new patient starts in Q3 2024 were for children below 5 years of age, implying healthy adoption from families who seek VOXZOGO therapy for their infants and young children.
10) Summit Therapeutics Inc. (NASDAQ:SMMT)
Number of Hedge Fund Holders: 21
Average Upside Potential: 52.7%
Summit Therapeutics Inc. (NASDAQ:SMMT) is a biopharmaceutical company, that focuses on the discovery, development, and commercialization of patient, physician, caregiver, and societal-friendly medicinal therapies. Analyst Mitchell Kapoor of H.C. Wainwright reiterated a “Buy” rating on the company’s shares, which stems from several factors revolving around the strong outlook of the company’s key drug candidate, ivonescimab. Elsewhere, Truist initiated coverage of Summit Therapeutics Inc. (NASDAQ:SMMT)’s stock, offering a “Buy” rating and a price target of $35.
As per Truist’s analyst, ivonescimab remains the most clinically advanced asset in a novel class of drugs, which can surpass the most successful drug class in oncology. While lung cancer demonstrates a strong market opportunity, the total addressable market for ivonescimab is much broader. Furthermore, Truist analyst Asthika Goonewardene predicts that ivonescimab might be available in the US and Europe in early 2026.
Additionally, the analyst believes that ivonescimab can garner annual sales in the double-digit billions. Summit Therapeutics Inc. (NASDAQ:SMMT)’s aggregate cash and cash equivalents and short-term investments came in at ~$487 million and $186.2 million at September 30, 2024 and December 31, 2023, respectively. In September 2024, Summit Therapeutics Inc. (NASDAQ:SMMT) also closed a private financing of $235 million with multiple leading biotech institutional investors and insiders, strengthening its cash balance to extend the runway.
