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Investing.com -- Citi has turned more constructive on European healthcare services and MedTech stocks, highlighting valuation resets and resilient Q1 performance as reasons to reassess the sector’s prospects.
In the latest note on Thursday, the bank upgraded Demant A/S (CSE:DEMANT) to Buy and reiterated Alcon (NYSE:ALC) as its top pick, citing strong innovation pipelines and turnaround potential.
European MedTech stocks have underperformed the broader EuroSTOXX index by approximately 1,200 basis points year-to-date. Citi sees this underperformance as overdone, especially as most companies have now priced in worst-case tariff and foreign exchange scenarios.
“With the sector now trading at/or below historical averages, 1Q25 largely showing resilience, and forward guidance ranges now incorporating in many cases worst-case tariff scenarios , we expect a “return to normal” from here,” Citi analysts led by Veronika Dubajova wrote.
Alcon remains Citi’s most differentiated idea and is kept on the firm’s Focus List. The analysts forecast 2026-2029 revenues 3–6% above consensus, underpinned by new product launches including Unity, TRYPTYR, P7, and PanOptix Pro.
“We prefer structural growth/innovation leaders given the strong link we see between organic sales growth and valuation/share price performance,” the analysts noted.
Meanwhile, Demant was upgraded from Neutral to Buy, with Citi citing a potential inflection point in wholesale momentum, with the stock trading at a 8-year high discount compared to Sonova despite similar growth.
“Demant shares have underperformed EU MedTech by c.1,600bp and peer Sonova by c.1,300bp, largely reflecting disappointing wholesale growth in a competitive market,” the team said.
Citi expects Demant’s wholesale organic sales growth to accelerate into 2026, aided by easier comps, returning managed care contracts, and a new platform launch that could arrive as soon as August.
The new 12-month price target of DKr335 implies about 32% upside.
Citi now holds 11 Buy ratings across its EU MedTech coverage versus just three Sell calls, including Elekta (BS:EKTABs) AB ser. B (ST:EKTAb), Sonova H Ag (SIX:SOON), and Straumann Holding AG (SIX:STMN).