Perhaps it’s a continuation of the market’s recent weight loss craze.
The stock market profile has changed dramatically with weight loss drugs such as Novo Nordisk’s (ticker: NVO) Wigovy. Novo and weight-loss rival Eli Lilly (LLY) were the hottest stocks, while stocks in diabetes and sleep apnea drugs faced backlash from the party.
In recent days, Wall Street analysts have said that a world slimmer due to so-called GLP-1 drugs could benefit airlines such as United Airlines Holdings Inc. (ticker: UAL) because lower passenger weight saves fuel. was bullish on the stock and assumed it would be bearish on the restaurant’s strategy. As customers eat out less, software vendor His Toast (TOST) emerged.
Yes, for now, GLP-1 trading seems overdone.
Jefferies analyst Matt Taylor thinks so. On Monday, we upgraded insulin pump maker Insulet (PODD) from a “hold” rating to a “buy” rating. The stock has fallen 50% since May, and its substantial valuation has now been reduced to a level that allows it to consider GLP-1, he said. Impact on diabetes prevalence. He sees a lot of opportunity for Insulet and its pump rival Tandem Diabetes Care (TNDM), as well as for blood sugar monitor makers.
DexCom (DXCM), he reiterated his Buy rating on the latter two names.
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Insulet stock rose 3.5% to close at $165.56 on Monday in a flat market. Tandem stock rose 5.9% to $21.99.
as Barons As featured in our September cover story, the significant benefits of GLP-1 drugs such as Novo’s Ozempic and Lilly’s Munjaro have captured Wall Street’s imagination. The GLP-1 craze is also hurting once-popular stocks like Insulet and Dexcom.
Physician research leads Jeffries’ Taylor to believe that insulin use has advanced enough to accelerate the growth of insulin and tandem, and that many patients will continue to develop type 2 diabetes for years to come. did.
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“[Insulet’s] “Growth opportunities are not materially compromised by the use of GLP-1 or other weight loss drugs,” Taylor said in Monday’s Update. He believes Insulet’s stock price could rise to $240 from recent levels of around $164 if investors see pump sales increasing unabated.
Mr. Taylor’s price target calls for a fairly high multiple. His $240 price target for Insulet is 113 times 2024 earnings per share estimates of $2.12. His DexCom target of $155 is 99 times the expected 2024 earnings per share of $1.57. It’s clear that medical device analysts like him are reinvigorated after the medical device sector was hit by GLP-1 this summer.
Morgan Stanley analyst Patrick Wood wrote in a recent note that the GLP-1 decline in medical technology stocks is “likely overdone.” By 2027, he says, even if 30% of people with type 2 diabetes adopt his GLP-1 drug, Wood’s model predicts only a 4% reduction in patients needing insulin. Masu. Still, he believes it is premature to upgrade DexCom and his Insulet rating from his Equal Weight.
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GLP-1 drugs work, in part, by quieting hunger signals in the brain. The effects of drugs on Wall Street’s brain became clear last week.
Mizuho analyst Dan Drev on Monday downgraded restaurant software company Toast from “buy” to “neutral.” His downgrade of the $18 stock was primarily due to his observations of declining volumes among Toast customers and his concerns about Toast’s restaurant loans.
However, Mizuho analysts are concerned that GLP-1 drugs could be a drag on the restaurant industry. “Longer term, we believe the widespread use of GLP-1 drugs such as Ozempic for type 2 diabetes and weight loss may reduce restaurant spending,” Dolev wrote.
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Last week, Jefferies tasked its entire research team with examining the effects of GLP-1 on a slimmer society. Thursday’s report made several headlines, with speculation that industries such as food packaging could suffer while airlines benefit.
Airlines’ biggest expense is fuel, said Sheila Kahyaoglu, an analyst at Jefferies. If every passenger he lost 10 pounds, an airline like United Airlines could save him 1,800 pounds per flight. That would save the company $80 million a year at current fuel prices and boost United’s earnings by 2%, or 20 cents a share.
Meanwhile, her colleague Phil Ng speculated that if GLP-1 suppresses America’s appetite, his paper and packaging company could see less demand from dining customers.
Ultimately, however, none of Jefferies’ analysts changed their view on their sector after considering the impact of GLP-1 use.
For most stocks, the impact of widespread weight loss is probably priced in.
Email Bill Alpert at [email protected].
