Medical device makers, like many manufacturers, have faced challenges over the past yr from inflationary supply chain costs, staffing shortages and the strong dollar impacting sales overseas. But the brand new yr has brought a more positive tone from firms within the sector, at the same time as large technology players and others are announcing layoffs and sounding the alarm over a possible recession. “Based on commentary, the broader environment appears to be progressively improving, and early 4Q pre-announcements have mostly been above consensus,” wrote KeyBanc Capital Markets analyst Matthew Mishan in a note to clients. “We proceed to imagine in a MedTech investment thesis of relatively recession resilient sales.” The sector is coming off its worst decline for the reason that financial crisis in 2008. The iShares U.S. Medical Devices ETF (IHI) fell greater than 20% last yr, underperforming the S & P 500. Nonetheless, since 2007 the device sector ETF has averaged a gain of 14% per yr, 6 percentage points higher than the broader market index over the identical period. Medical device stocks to observe Given this backdrop, CNBC Pro screened for medical device corporations with a valuation of greater than $1 billion, which have buy rankings from at the very least 60% of analysts who cover them, in addition to a median price goal implying a gain of 30% or more over the following yr. Seven corporations met the factors. A lot of them have raised their outlook this month. One among the highest names was Paragon 28 , a small cap device maker which went public in 2021. The corporate makes a speciality of plating and bone graft systems to treat ankle and orthopedic problems. While not widely followed, all six of the analysts covering the stock rate it a buy, in accordance with FactSet. The mean price goal implies nearly 50% upside over the following 12 months. “We imagine Paragon 28 is reaching its growth stride and is positioned to take share within the fastest-growing segment of the orthopedic market,” said Canaccord Genuity analyst Kyle Rose in a note to clients earlier this month. The corporate preannounced higher than expected fourth quarter sales of $51.2 million-$51.5 million, which might represent 20% yr over yr growth. Shockwave Medical also raised its 2022 outlook, and boosted 2023 sales guidance as well. The maker of catheters used to treat hardened arteries told analysts last week that’s confident that certainly one of its marquee products will receive the best tier Medicare reimbursement rate of $17,000 in coming months; the corporate is in discussions with the Centers for Medicare and Medicaid. Greater than 60% of analysts rate the shares a buy, with a mean price goal implying 34% upside. But, Oppenheimer’s Suraj Kalia will not be buying the bull case on Shockwave. He has a sell rating on the stock. “Our evaluation suggests … their device is not any higher than less expensive or inexpensive devices already in the marketplace. They’ve not demonstrated why they’re higher or why they ought to be costlier,” Kalia told CNBC. One among the standouts on the list is Procept BioRobotics , which makes surgical robots to treat urological conditions. Nearly 90% of analysts rate the stock a buy, with mean price goal of $53, implying greater than 30% upside. Earlier this month, the firm pre-announced preliminary 2022 full yr sales of roughly $75 million, a greater than tenfold increase over 2020 sales. CEO Reza Zadno told investors on the JP Morgan health conference that its newest robotic tools to treat enlarged prostate glands is seeing strong growth. “We’ve a protracted runway ahead of us. And patients are actually asking for this procedure, because they need each efficacy, safety and sturdiness,” Zadno said. BTIG analysts Marie Thibault and Ryan Zimmerman think that M & A may very well be one other catalyst for the medical device sector in 2023, with robotic surgery players more likely to be of particular interest. “There are plenty of emerging surgical robotics corporations and while many are unproven, corporations similar to Medtronic and J & J are finding it more difficult to muscle into ISRG’s space. We expect MDT and JNJ could pick up some assets to either integrate or bolster their position in surgical robotics,” the BTIG analysts said in a research note.