Goldman Sachs is bullish on these health care stocks.
Last U.S. presidential election season, health care stocks didn’t perform very well. Political headline risk related to drug pricing and "Medicare for All" could weigh on health care valuations again in 2020. Fortunately for investors, the Goldman Sachs analyst team says there are still plenty of opportunities for long-term investors to buy health care stocks heading into an election year. Goldman says valuations are reasonable, aggressive policy changes are unlikely, innovation and product development are booming and there is consolidation potential in the sector as well. Here are Goldman’s eight high-conviction health care stock ideas for 2020.
Amgen (ticker: AMGN)
Amgen is a global biopharmaceutical company that markets drugs for oncology and inflammation. Analyst Terence Flynn says Amgen will likely outperform consensus revenue and earnings per share estimates in 2020 and 2021. After winning a patent battle against arthritis drug Enbrel in August and acquiring plaque psoriasis and psoriatic arthritis drug Otezla shortly thereafter, Flynn says Amgen is on track to grow revenue by between 4% and 8% annually over the next four years. Data on Tezepelumab and AMG 510 may also be near-term catalysts. Goldman has a “buy” rating and $279 price target for AMGN stock.
BioMarin Pharmaceutical (BMRN)
BioMarin is a biopharma company focused on the treatment of serious rare and ultra-rare diseases. Analyst Salveen Richter says BioMarin has a diversified portfolio of treatments that is positioned to deliver more than 20% revenue growth in 2020. Richter estimates BioMarin’s seven core commercial products will generate a combined $1.7 billion in fiscal 2019 revenue and peak at more than $6 billion in combined revenue in 2030. Richter estimates peak sales for BioMarin’s gene therapy treatment for hemophilia A at $1.3 billion. Goldman has a “buy” rating and $157 price target for BMRN stock.
Incyte Corp. (INCY)
Incyte is a biotech company focused on hematology, oncology and inflammation. Richter says Incyte’s lead drug Jakafi is on track for $2.9 billion in peak 2028 sales. In addition, he says Incyte has a strong development pipeline of 21 drugs, with eight already in pivotal-stage clinical trials. Phase III Gravitas-301 data for itacitinib in steroid naïve acute graft-versus-host disease should be a near-term catalyst. Richter is anticipating updates from the company’s dermatology franchise in the first half of 2020. Goldman has a “buy” rating and $122 price target for INCY stock.
Iqvia Holdings (IQV)
Iqvia is a global advanced analytics, technology and life sciences research company. Analyst Robert Jones says Iqvia is a large-cap growth stock, and its research segment should be particularly strong in 2020. Jones says the market isn’t fully appreciating Iqvia’s technology segment, which is producing healthy organic revenue growth due to solid demand for real-world evidence. Jones says the election cycle could drive RWE demand in 2020, differentiating Iqvia from other health care stocks that have negative headline risk. Goldman has a “buy” rating and $191 price target for IQV stock.
UnitedHealth Group (UNH)
UnitedHealth is one of the largest global managed care organizations. Analyst Stephen Tanal says United’s commercial, Medicare Advantage and Medicaid businesses are all attractive, and its Optum acquisition gives the company access to a unique collection of data and services. Goldman is projecting more than $19 billion in operating cash flow in 2020, with only about $2.3 billion needed for capital expenditures and share buybacks. Tanal says 2020 guidance is conservative, and UnitedHealth is well-positioned for at least 13% annual EPS growth. Goldman has a “buy” rating and $330 price target for UNH stock.
Vertex Pharmaceuticals (VRTX)
Vertex is a biopharma company focused on developing treatments for cystic fibrosis. Vertex is also developing a pipeline of therapies for pain, sickle cell disease, kidney disease and other conditions. Vertex shares gained 25% in the past three months, and Richter says Vertex is on track for impressive EPS growth in the coming years due to its multiple pipeline drivers. Goldman has a “buy” rating and $285 price target for VRTX stock.
Dentsply Sirona (XRAY)
Dentsply Sirona is one of the largest manufacturers of dental office solutions, including consumables and high-end equipment. Analyst Nathan Rich says Dentsply Sirona’s new Primescan intraoral scanner should benefit from long-term demand and be a major contributor to 2020 revenue growth. In the longer-term Primescan upgrade programs could drive additional revenue upside. In addition, new product launches and the company’s One DS loyalty program could be bullish catalysts. Rich says the company’s restructuring efforts appear to be ahead of schedule, suggesting potential margin growth opportunities ahead. Goldman has a “buy” rating and $66 price target for XRAY stock.
Zoetis is the global leader in animal health medicines and vaccines. Rich says Simparica Trio could be the world’s first $1 billion animal health drug and has the potential to add as much as 30 percent to Zoetis EPS. Favorable pricing and product mix should contribute to cash flow growth and boost margins as well. Finally, Rich says the company’s expansion to diagnostics and new pain drugs may be long-term growth opportunities as well. Pet care has also historically been relatively recession-proof, potentially limiting downside risk. Goldman has a “buy” rating and $148 price target for ZTS stock.
Goldman Sachs' top health care stocks for 2020:
Amgen (AMGN)BioMarin Pharmaceutical (BMRN)Incyte Corp. (INCY)Iqvia Holdings (IQV)UnitedHealth Group (UNH)Vertex Pharmaceuticals (VRTX)Dentsply Sirona (XRAY)Zoetis (ZTS)