Wells Fargo analyst Larry Biegelsen recently initiated coverage of GE Healthcare (GEHC) stock and assigned it a Buy rating with a price target of $90. One of the main factors contributing to this positive outlook is the sales generated from the company's Alzheimer's treatment.
Approval for Alzheimer's Disease Drug
On July 6, the FDA granted Leqembi, a drug developed by Japanese pharmaceutical companies Eisai and Biogen, traditional approval for the treatment of Alzheimer's disease. As part of the treatment process, patients are required to undergo four MRI scans before and during the course of treatment, in addition to PET scans and doses of an imaging agent.
With its expertise in manufacturing and servicing imaging equipment, GE is well-positioned to benefit from the increased demand for Leqembi. Biegelsen estimates that the company could generate an additional $500 million in sales from Leqembi-related business by 2027, surpassing the overall market growth rate. As a result, GE is expected to experience a "double-digit" earnings growth rate in the coming years.
The positive outlook for GE Healthcare Technologies is echoed by analysts on Wall Street. Sales projections for 2023 stand at $19.5 billion, increasing to $24.9 billion by 2027. Furthermore, earnings per share are projected to grow at an average annual rate of 15% over the span of this period.
GE HealthCare Receives Buy Rating from Analysts
GE HealthCare's stock is showing positive movement in premarket trading, with a 1.4% increase to $71.50 per share. In comparison, futures for the S&P 500 and Dow Jones Industrial Average remain flat.
Analysts have recently assigned a Buy rating to GE HealthCare, with 58% of them recommending the stock. This surpasses the average Buy-rating ratio of approximately 55% for S&P 500 stocks. Currently, twelve analysts cover GE HealthCare, according to FactSet.
Following the spin-off from General Electric (GE) in early 2023, it took some time for analyst coverage to gain momentum. In contrast, peers such as Siemens Healthineers (SHL.Germany) and Abbott Laboratories (ABT) already have 20 and 25 analysts covering their stocks, respectively.
The average analyst price target for GE HealthCare stands at around $90 per share, aligning with Biegelsen's perspective.
If GE HealthCare's stock reaches $90 per share, it would trade at approximately 21 times the estimated earnings for 2024. On the other hand, Siemens Healthineers stock has a price-to-earnings ratio of about 19 based on current trading levels, rather than analysts' target prices. The average analyst target price for Siemens Health stock is about 63 euros, leading to a price-to-earnings ratio of around 25 for the estimated earnings of 2024.