Needham sees orthopedics market slowing; favors Enovis, Paragon 28

Needham says it expects development within the orthopedic system market to gradual later this 12 months, however sees Enovis (NYSE:ENOV) and Paragon 28 (NYSE:FNA) as having the ability to beat the development.

The funding financial institution stated it expects market development for the merchandise to gradual to 4% to five% for 2024 and past. As compared, 2023 noticed development of seven%, the best price in over ten years, save for a pandemic “bounce again” in 2021.

Needham attributed final 12 months’s strong features to pandemic-related backlog, improved pricing, enabling applied sciences, and new launches driving product combine.

“In our view, the process backlog and pricing are usually not sustainable,” wrote the analysts of their word. “Nevertheless, we predict the combo impact and enabling applied sciences are more likely to last more.”

Needham stated that after attending the annual assembly of the American Academy of Orthopaedic Surgeons, or AAOS, earlier this month, it’s favoring Enovis (ENOV) and Paragon 28 (FNA), given their new product launches and “engaging” valuations.

Enovis inventory has been on the upswing since early January, climbing 12% year-to-date as of Feb. 25, thanks partly to its latest acquisition of Lima for round $1B and a This autumn earnings report that beat the Road. Needham put the inventory on its 2024 convictions record in December.

“We anticipate ENOV’s new product launches, orthopedic market energy and the Lima acquisition to drive upside to consensus in 2024,” the Needham analysts commented.

Different companies similar to Stephens are additionally bullish on the inventory. Of the 12 analysts tracked by SA who cowl Enovis, 9 rated the inventory a powerful purchase, 2 a purchase and 1 a maintain. The inventory’s Quant rating is presently a purchase, regardless of incomes a D in valuation.

Paragon 28 is one other Needham favourite, with the agency citing the corporate’s new bunion-focused merchandise and provide chain enhancements, together with continued gross sales power growth and surgeon coaching. Needham added that its imagine Paragon 28 “can return to its historic roughly 20% income development in 2024.”

Paragon 28’s inventory is up 7% year-to-date, helped by a constructive preliminary income report issued in early January. The corporate is slated to launch its This autumn report on Feb. 29.

Of the 7 analysts tracked by SA who cowl Paragon 28, 4 have rated it a powerful purchase and three a purchase. The inventory’s Quant score is presently a maintain, nevertheless, due partly to a D in valuation.

Needham additionally maintained its purchase score on CONMED (CNMD) and maintain scores on Zimmer Biomet (ZBH) and Stryker (SYK).

Different main makers of orthopedic gadgets embrace Johnson & Johnson (JNJ), Medtronic (MDT), Smith + Nephew (SNN), Globus Medical (GMED), Orthofix (OFIX), and ZimVie (ZIMV).