Hologic: Meet Goldman Sach's New 'Conviction Buy'

Hologic, Inc. HOLX — the manufacturer of diagnostic products, medical imaging systems and surgical products — is being added to Goldman Sachs' conviction list.

The list is made up of Goldman's Buy-rated stocks that analysts said have the best alpha-generation opportunities. Alpha is the incremental return an asset generates over a related benchmark.

The Analyst

Goldman analyst Isaac Ro has a Buy rating on Hologic and raised the price target from $45 to $50.

The Thesis

The favorable setup into fiscal 2018 positions Hologic to outperform, especially after a lackluster 2017, analyst Ro said in a Thursday note. (See Ro's track record here.) 

Concerns surrounding Hologic's Cynosure acquisition are now behind the company, as the CEO decided to stay with the company after a contract renegotiation, Ro said. 

Investors may be underappreciating easy comps in the core business, particularly in the second half; double-digit growth in the ex-U.S. business and the potential upside from a tax reform, according to Goldman. 

The analyst projects 20 percent upside to his Hologic price target. 

Following its attendance of Hologic's key medical conferences a check thatevealed positive new product momentum, Goldman said the new product cycle in the diagnostic division will materially expand the addressable market.

The share loss to General Electric Company GE in the Breast Health division may not be as bad as investors feared, Ro said. Goldman expects ramp of new product cycles in 2018 to help the company retain share.

Goldman views the following as potential catalysts for Hologic:

The fiscal first quarter report in February. 

• The ASLMS conference in April. 
• Easing comps in the second half. 
• Tax reform.
• Take-out potential.

The Price Action

Hologic shares are up over 10 percent year-to-date.

At the time of writing, the shares were rallying 1.42 percent to $42.27.

Related Links:

Deutsche Bank Optimistic On Fundamentals In Life Science Tools/Diagnostics Sector

Intuitive Surgical Makes New All-Time High After Q3 Beat

Photo courtesy of Hologic.