Funds flow west into AI, medical technology sector undervalued, BMO calls out: Historic "gold mine" emerging, top pick Intuitive Surgical, Inc. (ISRG.US) and two other targets.

BMO Capital Markets has designated Intuitive Surgical, Inc. (ISRG.US), Globus Medical (GMED.US), and Teleflex Incorporated (TFX.US) as the most confident stocks in the medical technology sector. The brokerage firm has started covering this hard-hit sector and described it as presenting a buying opportunity. In a research report on Wednesday, analyst Vik Chhopra pointed out that the current trading prices in the medical technology sector are about 31% lower than their 10-year relative average levels, approaching the largest discount to the S&P 500 index in the past decade. A survey conducted by BMO showed strong demand for hospital surgeries, and the analyst attributes the sector's weakness mainly to "fund flows and policy noise, rather than fundamentals." He stated that the fundamentals appear "healthy, with first-quarter performance generally exceeding expectations." "We believe that the medical technology sector is under-owned and undervalued, as funds have rotated into artificial intelligence/technology, leading to absent marginal buyers," Chhopra wrote. He believes that this disconnect provides an attractive opportunity for companies with "best-in-class franchise power" before a potential revaluation. He assigned "outperform" ratings to Intuitive Surgical, Inc. (ISRG.US), Globus Medical (GMED.US), Teleflex Incorporated (TFX.US), Align Technology (ALGN.US), Stryker Corporation (SYK.US), Siemens Healthineers (SAUHY.US), Enovis (ENVS.US), and Alphatec Holdings (ATEC.US). GE Healthcare (GEHC.US), Zimmer Biomet (ZBH.US), Solvay (SOLV.US), Henry Schein (HSIC.US), Envista (NVST.US), CONMED Corporation (CNMD.US), Dentsply Sirona (XRAY.US), and Integra Life Sciences (IART.US) received "market perform" ratings. Chhopra indicated that his top pick, Intuitive Surgical, Inc., is currently trading at a discount of around 31% to its three-year historical price-earnings multiple, despite having the strongest fundamental characteristics among its peers. He also highlighted Globus Medical's leading profit margin growth in the industry, partially attributed to the company's acquisition of Nevro last year. As for Teleflex Incorporated, Chhopra stated that the market consensus has not yet reflected the company's "inflection point" in earnings per share (EPS) for 2027, which could provide upward potential for the stock. He set price targets for these three companies at $518, $94, and $159 respectively.