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3 MedTech Stocks Up Above 50% That Might Lose Steam in 2021

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Sriparna Ghosal
·5 min read
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The global economy has been grappling with the coronavirus pandemic- borne crisis. Slowdown in employment rate, erratic movement of the benchmarks due to lack of clarity on the effectiveness of the approved vaccines against the more infectious COVID strain and the apprehension of a global recession primarily indicate the gravity of the ongoing economic turmoil.

Despite a brief respite in between, the resurgence of a fresh wave of coronavirus cases in the United States and Europe dampened investors’ spirits largely. On top of that, the emergence of a new coronavirus mutant detected in the UK since the end of December 2020 and the nation being on the verge of a renewed lockdown aggravated market woes.

On a brighter note, banking on its assumption of a successful rollout and distribution of the COVID-19 vaccines through the upcoming months, World Bank recently announced its upbeat projection for the global economy, suggesting a 4% expansion in 2021 following an estimated 4.3% contraction in 2020. Per the financial institution’s statement in its January Global Economic Prospects, “A recovery, however, will likely be subdued, unless policy makers move decisively to tame the pandemic and implement investment-enhancing reforms.”

MedTech Picture

The MedTech sector being more resilient than others, could recover swiftly from the economic downturn during the latter half of 2020. Regulatory clearances and the launch of a plethora of COVID-19 diagnostic tests plus large-scale shifting of consumer choices to digital healthcare options are steadily driving the share prices of several MedTech players. Also, with the momentum of emergency medical procedures and non-COVID products picking up, several companies witnessed sequential improvement in their third-quarter 2020 performances.

However, due to the persistence of a worldwide manufacturing ramp-down and supply-chain disruptions and a few other adverse externalities, a few stocks are likely to register a dismal performance in 2021. In this regard, it can be mentioned that Medtronic’s MDT business during the prevalent pandemic has so far been affected by mainly three factors, such as decline in procedure volumes, loss of large bulk purchases as a result of the pandemic-related slump in demand and a delay in capital-equipment purchases by hospitals and surgery centers. In its second quarter of fiscal 2021, barring the company’s Respiratory, Gastrointestinal and Renal as well as Specialty Therapies segments, its performance deteriorated in the remaining business units. Additionally, escalating costs and expenses put pressure on its margins.

Similarly, in the third quarter of 2020, Boston Scientific BSX reported a revenue decline at each of its core business segments and geographies.

These disappointing trends might continue to weigh on such companies, even in 2021.

3 Stocks Might Lose Sheen

The following are the three stocks that have skyrocketed over the past year but are unlikely to retain the winning streak in 2021. Their lackluster 2021 expectations warrant a cautious approach as investors reconsider their portfolio-management strategies. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Pacific Biosciences of California PACB: This currently Zacks Rank #2 (Buy) company with a market cap of $5.05 billion saw a 15.1% year-over year decline in its Product revenues during the third quarter of 2020. Service and other revenues dipped 2.9% year over year. Also, the company incurred an operating loss in the quarter.

Over the past year, the stock has surged 475.2%. For 2021, the company's earnings per share are expected to plunge 375.5% from the year-ago projection of 17 cents.

Allscripts Healthcare Solutions MDRX: This presently Zacks Rank #3 (Hold) company with a market cap of $2.32 billion encountered some headwinds in the September quarter. Gross profit in the reported quarter was down 7.8% from the year-ago period. In the same time frame, the company witnessed a 5.2% decline in its core Client Services and an 11.9% drop in its Software delivery unit revenues. Bookings too fell 20.8% from the prior-year quarter to $187 million.

Over the past year, the stock has surged 61.9%. For 2021, its EPS is projected to fall 10.2% from the year-ago expectation while revenues are forecast to dip 5.3%.

ABIOMED ABMD: This currently Zacks #3 Ranked company with a market cap of $14.58 billion saw depressed revenues for its flagship Impella in the United States during the second quarter of fiscal 2021. Contraction in the company’s both margins is also worrisome.

Over the past year, the stock has surged 78.3%. For fiscal 2021, its EPS is projected to fall 3.6% from the year-ago reported figure while revenues are anticipated to slip 1.1%.

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Click to get this free report Medtronic PLC (MDT) : Free Stock Analysis Report Allscripts Healthcare Solutions, Inc. (MDRX) : Free Stock Analysis Report ABIOMED, Inc. (ABMD) : Free Stock Analysis Report Boston Scientific Corporation (BSX) : Free Stock Analysis Report Pacific Biosciences of California, Inc. (PACB) : Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research