Med-tech stock Conmed tumbles ahead of big Q4 report… an opportunity?

When CONMED Corporation, a medical technology company based in Utica, New York NYSE:CNMD reports fourth-quarter financials after Wednesday’s close, it is expected to post some of its best growth in years.

You wouldn’t know it from the stock’s recent performance.

CONMED shares fell 10% last week despite no major company or industry news. In a rare down week for the U.S. stock rally, mid-cap companies fell below the $100.00 level in an apparent bout of profit-taking on one of the market’s hottest groups. Thanks to strong third-quarter earnings reports, favorable regulatory regulations and traders’ risk appetite, the Dow Jones US Medical Devices Index increased nearly 30% from November 1, 2023 to January 22, 2024.

Last week’s pause in CNMD was also motivated by the Hold rating issued by Wells Fargo which some shareholders appear to have interpreted as a sell signal. The analyst cited competitive pressures and growth uncertainty, the latter of which was surprising given Wall Street’s 32% fourth-quarter revenue growth forecast.

The supplier of devices and equipment for surgical procedures is expected to generate sales of approximately $332 million in the fourth quarter. Earnings per share (EPS) are expected to rise 164% year over year to $1.11. While CONMED’s growth is expected to slow from then on, the Street’s 26% EPS growth forecast for 2024 is nothing to complain about.

With CNMD trading below Wells Fargo’s $107.00 “bearish” price target – and well below the $118.50 consensus target – swing traders could have a bullish opportunity between the hands. CONMED comfortably beat EPS expectations for the first, second and third quarters of 2023. Earlier this month, Piper Sandler gave the stock a buy rating and a $130.00 target.

Currently, in the mid-90s, CNMD itself needs restorative surgery. This week’s earnings release could be the first step.

Will GLP-1 drugs harm CONMED’s growth?

CONMED sells a range of products used by surgeons and healthcare professionals in different surgical disciplines. His specialties include bariatric surgery for the treatment of obesity. As such, the stock has been sensitive to headlines surrounding Ozempic and other GLP-1 weight-loss drugs, which some have feared will reduce the need for bariatric procedures. In reality, not much is known yet about the potential side effects and use of these drugs.

Additionally, bariatric surgery equipment and supplies represent a small portion of CONMED’s business. The company provides products for many other procedures: colorectal surgery, general surgery, gynecological surgery, pediatric surgery, thoracic surgery, urological surgery, gastroenterology, dermatology, orthopedics, podiatry and pulmonology. Even if the Ozempic effect is large, it will likely have an insignificant impact on CONMED’s overall financial results.

The company’s outperformance in the third quarter, highlighted by adjusted EPS growth of 17%, was driven by healthy end-market demand. Core products In2Bones and Biorez made key contributions. This gave management the confidence to increase both full-year 2023 sales and EPS forecasts.

At the time, CNMD was trading around $90, meaning the market took back all the credit it had given for the optimistic outlook. If management can reiterate the positive outlook for 2024, a return above $100 could occur quickly.

Is CNMD stock oversold?

From a technical analysis perspective, CONMED stock has crept into oversold territory across multiple metrics. The relative strength indicator (RSI) is at 22. Any number below 30 indicates potential oversold conditions. When the CNMD slipped below the 30 RSI level in September 2023, it continued to rise to a six-month high.

The story is similar when we look at the daily Bollinger Bands chart. CNMD is trading outside the lower range, which solidifies the oversold cause. In fact, we have to go back to May 2022 to find the last time the stock traded this far outside its normal volatility range.

In terms of long-term support, CNMD has managed to bounce off the $91.09 level on multiple occasions since October 2023. Assuming it can continue to find buying support here, the downside to current prices is limited to approximately $3.00. Comparing this to the upside potential associated with the fourth quarter earnings beat and bullish price targets, the upside/downside ratio looks favorable.

Before you consider CONMED, you’ll want to hear this.

MarketBeat tracks Wall Street’s highest-rated and best-performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market takes hold… and CONMED wasn’t on the list.

While CONMED currently has a “Moderate Buy” rating among analysts, top analysts believe these five stocks are better buys.

View the five stocks here