In 2023, the only thing nearly as hot as generative AI technologies like ChatGPT were GLP-1 injections (weight-loss drugs like Ozempic). GLP-1 may not be the most significant healthcare breakthrough of all time, but it certainly represents one of its most profitable in a while. Further, I believe GLP-1 drugs shined a bright light on the rest of the healthcare industry and its ability to innovate to the degree of an AI firm. Highly-rated healthcare stocks — like BIIB, ZTS, and EXAS — look nothing short of compelling for the year.
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Indeed, disruptive biotech companies may have just as much growth potential as tech firms with skin in the AI game. Which biotech theme comes after GLP-1 drugs remains to be seen. Regardless, I think the space is worth watching if you’ve got an appetite for growth but are off-put by valuations on the top AI stocks.
Therefore, in this piece, we’ll discover three Strong-Buy-rated health and biotech firms that are innovating in their own right.
Biogen (NASDAQ:BIIB)
Biogen stock has been fluctuating wildly in both directions over the past decade, ultimately finishing 15% lower. Undoubtedly, it’s easy to just throw in the towel on the biotech firm that’s failed to deliver for its investors. Though Biogen doesn’t have its own ready-to-use GLP-1 drug, it’s an expert in the field of neurological diseases such as Alzheimer’s.
According to a recent Reuters report, weight-loss drugs may see a new growth frontier in Alzheimer’s, as researchers are studying how these drugs can treat the disease. Though it’s too early to conclude that Biogen’s hopping aboard the GLP-1 bandwagon, I think it’s a cheap stock with a robust pipeline of potential game-changers.
One potential game-changer may lie in Alzheimer’s treatment Leqembi, which recently won approval in China. The move is quite promising and has me staying bullish on the stock despite its lack of long-term momentum.
For a stock that’s gone nowhere in a decade, Biogen is a name that only patient, long-term value investors should seek out. Though untimely, Biogen stock was recently named a top biotech pick for 2024 by Baird. For this year, lower rates and a pick-up in M&A activity in the space could prove to be nice tailwinds for Biogen and the biotech scene as a whole.
What is the Price Target of BIIB Stock?
Biogen stock is a Strong Buy, according to analysts, with 21 Buys and six Holds assigned in the past three months. The average BIIB stock price target of $309.64 implies 24.8% upside potential.
Zoetis (NASDAQ:ZTS)
Could GLP-1 drugs for pets be next? Probably (actually, most definitely) not, but that doesn’t mean animal health firm Zoetis is a healthcare stock to scratch off your radar. The stock is in the middle of a remarkable comeback since bottoming out in October 2022. Still off around 20% from its highs, though, I view ZTS as a niche player with a wide moat and plenty of underrated innovations. For these reasons, I remain bullish alongside most analysts.
The company has posted a net income compound annual growth rate (CAGR) of 14.4% over the past five years. That’s impressive growth that probably won’t be curtailed anytime soon, not as the firm looks to reap the rewards of its Librela treatment for dogs suffering from osteoarthritis. It’s not only the first treatment of its kind for dogs, but it’s the only one on the market right now. That’s the beauty of being one of the very few players in the niche field of animal health.
Looking ahead, I’d look for the U.S. commercialization of Librela to pick up meaningful traction and propel shares toward new highs.
What is the Price Target of ZTS Stock?
Zoetis stock is a Strong Buy, according to analysts, with seven unanimous Buys assigned in the past three months. The average ZTS stock price target of $224 implies 12.6% upside potential.
Exact Sciences (NASDAQ:EXAS)
Exact Sciences stock has been a tough stock to own over the past five years, with shares swinging viciously in both directions. Over the past five years, shares of the diagnostics company behind such screening products as Cologuard (used to detect colorectal cancer in stool samples) are down 13%.
Cologuard leverages some impressive science to make its incredibly convenient and life-saving screener possible. Recently, Exact Sciences filed a lawsuit regarding alleged patent infringement revolving around one of its competitor’s colorectal screeners. It will be interesting to see how this one pans out. In any case, I’m staying bullish on EXAS stock.
In the meantime, I continue to applaud Cologuard’s growth potential (screening revenue grew 31% in the latest quarter) as more people become aware of just how easy it is to get tested for something as horrid as colorectal cancer. It’s also impressive that the firm is sticking with its guide of hitting $4 billion in sales by 2027. Given the nature of its business, I don’t expect any sort of economic downturn to prevent Exact from hitting its long-term targets.
What is the Price Target of EXAS Stock?
Exact Sciences stock is a Strong Buy, according to analysts, with 15 Buys and one Hold assigned in the past three months. The average EXAS stock price target of $91.21 implies 35.9% upside potential.
The Bottom Line
As more biotech and healthcare firms aim for a more preventative approach to medicine, I think it’s just a matter of time before firms invest greater sums into the high-growth areas of healthcare, such as GLP-1 drugs and cancer screeners. Add lower interest rates and AI-aided drug discovery into the equation, and it’s hard to ignore the biotech firms in this environment any longer.
The following three stocks have disruptive potential and innovative pipelines that could power market share growth over the long haul. Of the three names, analysts see the most upside potential from EXAS stock (35.9%) for the year ahead.
