Bernstein bullish on Thermo, Revvity, Guardant, PacBio; bearish on Illumina
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Bernstein is bullish on medtech stocks Thermo Fisher, Guardant Health, Revvity and PacBio, but sees further downside for Illumina, according to a new industry note. 
The investment firm kicked off coverage of the US life science tools and diagnostics sector last week, asserting that the sub-sector had âvastlyâ outperformed the broader market despite some rockiness over the last few quarters.
Bernstein attributed the recent weakness in part to such factors as post-COVID inventory de-stocking, economic problems in China and âcautiousnessâ in biopharma spending. But it also said that a correction was somewhat expected given past performance.
âIn reality, for an industry that talks about approximately 4% to 6% long-term core organic growth, weâve been above that for years, so some correction/reversion to the mean isnât surprising,â Bernstein analysts wrote in their note dated Sept. 27.
The good news, Bernstein said, is that the long-term demand drivers for the sub-sector âare still very much in placeâ and that the âshake-upâ created an opportunity for investors to buy long-term âwinnersâ at an attractive entry point and âtake advantage of short-term dynamics depressing share price.â
Topping Bernsteinâs outperform list for diversified toolmakers were Thermo Fisher (NYSE:TMO) and Revvity (RVTY). The bank set Thermoâs price target at $603 and Revvityâs at $133.
Meanwhile, Bernstein rated Avantor (AVTR) at market perform, commenting that despite high recurrent revenue and relatively low exposure to China, it believed investors âneed time to get over recent stumblesâ and that the stockâs multiple was âwarranted.â Bernsteinâs price target for the stock is $22.
Agilent (A) and Waters (WAT) were also rated market perform, with Bernstein asserting that it expects the slowdown in the demand for instruments to continue and that both companies have âlimited upside from major strategic actions.â Bernstein set a price targets of $123 for Agilent and $280 for Waters.
As for next-generation genomic sequencing, Bernstein said itâs bullish on Pacific Biosciences (NASDAQ:PACB) but bearish on sub-sector giant Illumina (NASDAQ:ILMN), due in part to a shift from short-read sequencing by synthesis, or SBS, which Illumina dominates, to a âmore competitive landscapeâ that includes technologies such as long-read sequencing.
In the case of Illumina, Bernstein asserted that its âmonopolyâ was under attack, making it the relative âloserâ in the space. Bernstein rated Illumina at underperform, despite a âhuge collapseâ of its share price. âWe think there is further downside,â Bernstein added, setting Illuminaâs price target at $111.
Meanwhile, Bernstein said it viewed PacBio as the relative âwinner,â stating that PacBioâs pipeline was set up to grab market share in both the long and short-read categories. âPacBio is at a huge point of inflection in growth,â the investment firm added. Bernstein rated PacBio outperform, with a price target of $11.
Guardant Health (NASDAQ:GH) was Bernsteinâs top pick in the molecular diagnostics space, with the bank rating it outperform with a price target of $34. Citing Guardantâs âfirst-mover advantage,â Bernstein sees the company delivering âsuperior growth.â Bernstein added that it viewed a recent pullback on the stock as a buying opportunity.
Bernstein was also bullish on Exact Sciences (EXAS), commenting that although the stock may appear pricey relative to peers, the âpremium is justifiedâ by the companyâs lower downside risk and positive cash flow. Bernstein rated Exact Sciences at outperform, with a $83 price target.
Natera (NTRA), meanwhile, was labeled âexciting,â but still given a market perform rating as Bernstein believes that the companyâs minimal residual disease, or MRD, product is âfurther away than the market appreciates.â
Bernstein warned investors, however, not to short Natera stock as the companyâs 22q screening could represent a $600M market opportunity. The firm set its price target for the stock at $48.
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