One of Stoxx Europe 600’s Worst-Performing Health Stocks May Rebound, Analysts Say
(Bloomberg) -- Analysts are betting on a rebound for one of the worst-performing health-care stocks in the Stoxx Europe 600 Index.
Shares of Royal Philips NV have tumbled 26% in 2021, their biggest annual drop in a decade, hurt by a product recall and supply-chain snags. Still, analysts on average see the stock gaining 35% next year as the medical-equipment company puts the recall behind it and demand for hospital procedures picks up.
“There’s an interesting entry opportunity as the underlying focus market potential remains intact, especially with the pandemic forcing greater emphasis on timely and accurate diagnosis/treatments,” Anas Patel, an analyst at Alphavalue, said in emailed comments.
The company issued the recall June 14 for its DreamStation breathing machines, used to treat sleep apnea, because the machines use foam that can degrade and be ingested, possibly presenting a cancer risk. On Dec. 23, Philips shares surged after the company reported the issues related to the recall might not be as bad as initially thought, something Citi analyst Kate Kalashnikova said in a note to clients “bodes well for the shares.”
But Philips has struggled aside from the recall. The company faced global supply chain challenges and a hoped-for surge never materialized in hospital procedures that had been postponed because of the pandemic. The share’s poor showing in 2021 even fueled speculation the company might attract takeover interest, as reported in Dutch business daily Het Financieele Dagblad in December.
Still, Patel has a buy recommendation on the stock and a price target of 44.50 euros, citing the Philips’ “healthy” growth in new orders, up 47% in the most recent quarter.
His optimism is shared by his peers. Among analysts tracked by Bloomberg, Philips shares have 14 buy recommendations, 11 holds and no sells.
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