Wells Fargo is getting more bullish on shares of Medtronic . Analyst Larry Biegelsen upgraded the medical device maker to overweight from equal weight in a Sunday note, saying that shares should benefit from improving medtech trends and a “maturing” product pipeline. “We rate MDT Overweight as we believe that the company will benefit as underlying medtech markets improve as staffing shortages ease in major markets,” he said. “We also see support from MDT’s pipeline.” He expects the company to benefit from an easing of staffing shortages as major markets, including Europe and China, look past the Covid-19 pandemic and handle a “backlog of deferred procedures.” Shares gained about 1.5% in premarket trading. Medtronic’s stock has gained a little over 10% year to date. Shares could surge about 17% from Friday’s close given the firm’s revised price target to $100 a share, up from $77. Within the company’s product pipeline, Biegelsen sees the biggest potential upside from the U.S. Food and Drug Administration’s approval of its upgraded insulin pump known as 780G. He called the approval, which was announced earlier this month , a “major milestone” able to “help stop the bleeding in MDT’s diabetes business.” The company’s diabetes business has grown roughly 15% year to date in areas outside the U.S. where the product’s been in the market since 2020, Biegelsen noted. MDT YTD mountain Shares so far in 2023 Other potential tailwinds include the launch of its pulsed field ablation product used to treat issues like an irregular heartbeat, or atrial fibrillation. Traction of Medtronic’s Hugo robot should also benefit shares. According to Biegelsen, Medtronic’s valuation also looks attractive, trading at a sharp discount to peers. The company trades at 16.5 times consensus 2023 earning per share, versus a median of 21.9 times for the broader group. “We believe once MDT moves past its FY2024 guidance in May, the stock can re-rate on the overall medtech recovery and product pipeline,” he wrote. — CNBC’s Michael Bloom contributed reporting
