Despite Higher Valuations, Some Life Sciences Tools Stocks Create Good Opportunities: Analyst

BofA Securities reports that the Life Sciences Tools sector struggled in fiscal year 2024.

Spending by pharmaceutical and biotech companies dropped after pandemic-related overspending, and demand in China stayed weak. This led some Life Sciences companies to lower their already-conservative fiscal year revenue forecasts as the year progressed.

For most of fiscal year 2024, Life Sciences company valuations remained higher than pre-COVID levels but declined after the U.S. elections.

Looking ahead to fiscal year 2025, initial forecasts and management comments suggest a mixed outlook.

The first half of the year is expected to mirror the challenges of late fiscal year 2024, while the second half could see improvement due to easier year-over-year comparisons, potential economic stimulus in China, and a broader market recovery.

After being cautious for most of the past year, the analyst sees some positive signs. The bioprocess market, important for certain Core Tools vendors, has been improving steadily and is expected to stabilize in 2025.

Although China’s stimulus has taken longer than expected, it is starting to lead to some new orders.

Valuations are still higher than the historical average, but they aren’t as high as in previous years, creating some good opportunities for stock picking.

BofA upgraded Danaher Corp (NYSE: DHR ) to Buy from Neutral, maintaining the price target of $290 .

In 2024, Danaher struggled with challenges like reduced bioprocessing inventory, a slowdown in China, and lower spending from biotech and pharma customers.

Also Read: Danaher’s Q3 Earnings Boosted By Bioprocessing Order Growth, Analyst Maintain Stock Rating

Analysts believe that bioprocessing, an important market, is nearly back to normal and should see steady demand in 2025.

Although China is still facing difficulties, BofA expects a strong increase in orders in the fourth quarter due to stimulus efforts, with positive effects likely starting in 2025.

BofA has also upgraded Revvity (NYSE: RVTY ) from Neutral to Buy with a price target of $138 .

The company is at a turning point after making significant business changes in recent years. While management did not provide guidance for fiscal year 2025 at the recent Analyst Day, the long-term strategy remains largely the same.

Even though the market is stabilizing in FY25, Revvity’s growth is expected to be below its 6-8% target range. As short-term industry challenges continue to lessen, BofA expects Revvity to perform well, bolstered by recent acquisitions.

Price Action: At last check Friday, DHR stock was down 0.15% at $234.14, and RVTY stock was down 1.56% at $114.21.