Medtech underexposed to potentially negative headlines from RFK Jr., says BofA By Investing.com

Investing.com — Bank of America analysts see potential for medtech stocks to continue rising as they appear less vulnerable to potential health care-related controversies tied to the RFK Jr. headlines.

The bank notes that recent developments have bolstered the sector, as medtech rebounded from lower valuations to trade much closer to its 10-year median discount for the device sector.

In just two days, the medtech’s discount on Tools decreased from 20% to 12%, indicating renewed investor interest.

However, BofA says medtech has “not yet exceeded” its long-term average discount to instruments and is still trading at a 10% discount to .

They explain that historically, medtech has enjoyed a 9% premium to the S&P 500 as recently as 2023, suggesting the potential for further gains. Analysts note that the medtech’s “depressed ratings” and its recent underperformance leave room for “more expansion for the rest of the group.”

While the value-driven product news may see short-term gains, BofA warns that external factors, such as taxes and the impact of foreign exchange (FX), could again erupt like storms in the next six months.

These risks may support a broader premium for quality growth names within the medtech sector, according to BofA. Despite the challenges, the bank says growth opportunities remain strong due to the introduction of new products.

“Quality growth PEs may be too high relative to history, but growth prospects are high,” BofA noted.

Analysts also highlighted that the medtech’s relative position in the market was strengthened by the “post-election quality growth rally” and reduced exposure to health care risks that may be associated with RFK Jr.’s potential impact.

While uncertainty remains, BofA maintains a cautiously optimistic view of the sector, emphasizing its resilience and resilience against broader market pressures.