JP Morgan has doubled down on its 'overweight' recommendation for Smith & Nephew PLC (LSE:SN) with analysts deeming the medical device company undervalued and trading near trough levels, with potential for significant re-rating.
Despite challenges in the broader European medtech sector, S&N stands out as a value pick with promising recovery prospects.
The sector has underperformed the wider market for three of the last four years, with 2023 narrowly salvaged by a late rally.
Factors such as slower growth in dental and hearing markets, China's anti-corruption measures and political uncertainty, including tariff threats, contributed to this underperformance.
These issues are expected to linger into the first half of 2025, along with cautious management outlooks, limiting excitement for the near-term sector outlook.
JP Morgan’s strategy favours value stocks with room for operational and market-driven improvements.
Beyond S&N, Fresenius SE is highlighted for its ongoing operational gains and Gerresheimer is seen as recovering from a challenging year with conservative guidance for 2025.
While new product launches at Alcon show potential, these are anticipated to impact results more significantly in the second half of the year.
S&N shares were range-bound in late morning trading at 1,004p. JPM reckons they are worth 1,180p each.