GE HealthCare Technologies Surges in 2023, Poised for More Growth Ahead

Dear Readers,

We’re excited to report that GE HealthCare Technologies (ticker: GEHC) has had an excellent start in 2023, with the stock gaining 26% since becoming an independent publicly traded company on January 4. This performance has outpaced the S&P 500 index’s 1.7% rise over the same period.

Although investors are optimistic about the company’s prospects, GE HealthCare will need to demonstrate progress on products and profit margins to allay fears and expand valuation multiples. Nevertheless, the company's recent advances in medical imaging, including deep-learning software that improves diagnostic accuracy and a handheld ultrasound unit, look set to drive revenue growth in imaging. Approximately half of GE HealthCare's sales come from recurring parts and services.

Peter Arduini, CEO of GE HealthCare since the beginning of 2022, is responsible for balancing research with profitability. Before joining the company, Arduini worked at medical device maker Baxter International and Integra LifeSciences Holdings, where the stock gained 16.6% a year on average, outperforming the S&P 500 by half a percentage point a year.

According to Bloomberg, just four analysts cover GE HealthCare. However, Mizuho Securities analyst Anthony Petrone, who launched coverage of GE HealthCare in February, surveyed 25 high-volume radiology sites across the US and found significant pent-up demand for scans and procedures coming out of Covid, perhaps even better than the company expects. Petrone rates the stock a Buy with a $90 price target, up 20% from Friday's close of $74.97.

Siemens Healthineers, which became a publicly traded company in 2018 after raising money in an initial public offering, might provide the best comparison to GE HealthCare. However, accounting for all of the M&A activity, GE HealthCare’s sales grew at 7% last year, compared with Healthineers’ 6% sales growth.

GE HealthCare's stock trades for about 12.8 times estimated earnings before interest, taxes, depreciation, and amortization, while Siemens Healthineers’ stock trades at 16.6 times Ebitda. Closing those gaps would put GE HealthCare at about $90, up almost 20%. Therefore, we suggest purchasing the GEHC $80 Call 7/21.

We expect that continued execution this year will help to close that discount, and we anticipate more gains ahead for the company.

Thanks for reading!

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