Biogen, Moderna, and 6 Other Promising Healthcare Stocks with Potential for Growth

That’s a strong start, and one that reflects a shift in how investors are thinking about the sector.

Healthcare stocks fell deeply out of favor in 2023, amid a rush away from what had been thought of as defensive plays into hot tech stocks. Now, with interest rates expected to fall, and lots of healthcare names trading at bargain-basement multiples, investors are moving back to healthcare.

To help stock buyers looking for where to place their bets in the sector, Barron’s screened the S&P 500 for healthcare stocks with the average analyst target prices as calculated by

FactSet

that were the farthest above their closing Tuesday prices.

Wall Street analysts who cover stocks set target prices based on their expectations of where a stock will trade over a given period, usually twelve months. FactSet averages the target prices of the analysts whose coverage of each stock appears in its database.

Stocks that topped our screen include the biotechs

Biogen
,

Moderna
,

and

Incyte
,

the animal health company

Zoetis
,

and the healthcare services giant

UnitedHealth Group
,

among others.

The stocks that passed our screen enjoy the enthusiasm of Wall Street analysts, but not necessarily that of investors. A number of the stocks are down on the year, including UnitedHealth and

Biogen
.

The stock at the very top of our screen was

Insulet
,

which makes a wearable automated insulin delivery system for diabetics. Shares of

Insulet

were down 21.4% so far this year as of Tuesday’s close. Much of that drop came over a two-day period in late February, when shares fell from $197.14 to $168.83 after the company issued guidance that unsettled the market.

Many of the target prices in FactSet’s database were updated amid that selloff, suggesting that those projections may not fully take into account how far the stock fell.

As for UnitedHealth, one of the sector’s largest companies, shares were down 6.3% as of Tuesday, but analysts still see 20.8% in implied potential upside. UnitedHealth shares have slipped amid a reported Department of Justice antitrust investigation and a hack of its Change Healthcare subsidiary that has devastated healthcare providers across the U.S.

Moderna
,

which also came in near the top of the screen, had gained roughly 6% this year as of the end of the day Tuesday, and its average target price implies 22.8% in potential upside. The stock fell dramatically last year, as sales of its Covid-19 vaccine fell well short of expectations, but analysts are beginning to look forward towards the company’s respiratory syncytial virus vaccine, which could launch this year, and its longer-term cancer program.

Biogen, which has dropped 16% this year, has an average target price that is 36.9% above its recent price, our screen found. Earnings results the company reported in February fell short of expectations, and while the company’s new CEO says Biogen is positioned to return to “sustainable growth,” investors seem unconvinced.

Write to Josh Nathan-Kazis at josh.nathan-kazis@barrons.com