Healthcare is one of the biggest industries in the US. Total spending on Medicaid and Medicare is forecast to reach over a trillion by 2027. On the S&P 500, healthcare stocks have a market weight of 11.13% or a $6.8 trillion market cap. CMS forecasts 7.4% and 5.2% annual growth in spending for Medicare and Medicaid, respectively.
This expected growth creates growth opportunities for companies in the health industries. There are opportunities for drug manufacturers, medical device companies, insurers, and others. With that in mind, here are the three main companies to consider adding to your portfolio in the third quarter of 2024.
These three healthcare stocks have demonstrated exceptional performance since the start of 2024. Let us take a closer look at why you should add them to your portfolio in 2024.
Intuitive Surgical ($ISRG)
Intuitive Surgical (NASDAQ: $ISRG) may not be well known to those outside the medical world. However, it is one of the most well-known companies among surgeons for its da Vinci systems.
A single da Vinci system costs over $1.5 million. Additionally, system operators must pay annual service charges, other instrument costs, and an implementation cost.
The high initial cost and the ongoing revenue from installed systems have made Intuitive Surgical one of the fastest-rising companies in the medical industry. In its full-year fiscal 2023 results, it recorded a 14% YoY revenue increase to $7.12 billion, with 83% coming from recurring revenue sources.
Intuitive Surgical reported a 14% increase in installed da Vinci systems in its Q2 fiscal 2024 results to 9,203 systems worldwide. Second quarter revenue increased 14% YoY to $2.01 billion, while non-GAAP net income grew 26.43% YoY to $641 million.
ISRG Stock Performance
ISRG stock is amongst the best-performing stocks of 2023. Year to date, it is up 34.04% to $443.66 per share as of July 29, 2024. Over the past 12 months, its value has risen 36.76%. Its current price is above the 50- and 200-day moving averages of $426 and $367.81, respectively.
Analysts are optimistic about its future, giving it a wide broad forecast range with a high of $520 and a low of $410. Their average forecast of $479.11 is a 7.99% upside.
Intuitive Surgical could potentially be a great investment with growth potential. It has a solid balance sheet, with $7.68 billion in cash and zero debt. However, its forward P/E of 70.42 is higher than most healthcare stocks.
Eli Lilly ($LLY)
Eli Lilly (NYSE: $LLY) is one of the biggest companies worldwide, whose primary driver of growth is its diabetes and weight loss medication.
It holds a huge market share in other treatments like cancer, immunology, and Alzheimer’s. The company has seen steady revenue growth in recent years, from $22.3 billion in fiscal 2019 to $34.1 billion in fiscal 2023.
In its first quarter fiscal 2024 results, Eli Lilly reported a 26% YoY increase in revenue to $8.77 billion. It forecast revenue of $42.4 to $43.6 billion for fiscal 2024 and a non-GAAP gross margin of 33% to 35%.
LLY Stock Performance
LLY stock has had a great run in 2024, rising 36.40% year to date to $807.79 per share as of July 29, 2024. Over the past 12 months, the stock has surged 77.71%. Its current is below its 50 DMA of $864.56 and above its 200 DMA of $721.73.
Analysts are upbeat about its future, giving the strong a strong buy rating. They forecast a wide range for the stock, with a high of $1,117.00 and a low of $793. The analysts’ average forecast of $952.16 is a 17.87% upside.
While LLY is a potentially lucrative investment, its main downside is that it is highly overvalued, with a forward P/E of 58.82, above the health sector’s average of 19.1. Additionally, it could potentially lose market share in the weight loss sector as new drugs launch.
Telix Pharmaceuticals ($TLX)
Telix Pharmaceuticals (ASX: $TLX) is a pharmaceutical company aiming to revolutionize the medical industry using a unique approach. The company is a pioneer in theranostics, a field of medicine that combines diagnosis, treatment, and follow-up.
The company has already made waves after achieving global regulatory approval for a prostate cancer imaging agent and several promising clinical trials. Their unique approach places them at the fore of the novel and exciting field of personalized medical care.
In its second quarter fiscal 2024 results, Telix Pharmaceuticals reported revenue of $124 million, a 55% YoY increase. It also issued full-year revenue guidance of $490M to $510M, representing revenue growth of 48% to 54% compared to fiscal 2023.
TLX Stock Performance
TLX stock has performed quite well in 2024, rising 96.53% year to date to AU$19.1 per share as of July 29, 2024. Over the past 12 months, the stock has gained 75.47%, making it one of the best-performing stocks of 2024.
Its forward P/E of 21.01 signals a fair valuation, just slightly above the S&P 500 Healthcare sector forward P/E of 19.1. Besides its fair valuation, the company has a great balance sheet with $122.71M in cash and a 1.63 debt-to-equity ratio.
Analysts are optimistic about the future of TLX stock, giving a strong buy rating. They forecast a wide range for the stock, with a high of $AU$30.72 and a low of AU$16.58. Their average forecast of AU$21.09 is a 6.90% upside.
It also has several clinical trials in the advanced stages that could boost revenue in the future. Based on its financial performance and product pipeline, TLX stock could potentially be one of top healthcare stocks of Q3.
Should You Invest In These Three Stocks
Investment decisions are based on personal preference, and an in-depth analysis. However, based on their performance so far, these three healthcare stocks cold potentially boost your portfolio in the third quarter of 2024.
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