On Thursday, HSBC initiated coverage on GE HealthCare (NASDAQ:GEHC) Technologies Inc. (NASDAQ:GEHC) with a Buy rating and set a price target of $100.00, indicating a potential upside of approximately 20%. The coverage begins as analysts see a favorable risk-reward balance for the company, which is currently trading at significant discounts compared to its peers.
GE HealthCare is trading at a forward price-to-earnings (PE) ratio of 16.9 and an enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of 13.8 times, based on HSBC's 2025 estimates. According to HSBC, these figures represent a 28% and 24% discount to the median of its peer group based on 2025 consensus PE and EV/EBITDA, respectively.
HSBC's price target is derived from an adjusted present value (APV) valuation method, assuming a weighted average cost of capital (WACC) of 8.5%. The firm highlights GE HealthCare's engagement in less cyclical end markets and its potential for profit growth through solid management, strategic mergers and acquisitions, and self-help initiatives.
The firm also points out the company's promising prospects in artificial intelligence (AI) and innovation. These factors contribute to the positive outlook and the expectation of the company's stock performance.
However, HSBC also notes potential risks for GE HealthCare, including execution risks and the possibility of not meeting high market expectations. These factors are considered the main downside risks in their analysis of the company's future performance.
InvestingPro Insights
InvestingPro data showcases GE HealthCare Technologies Inc. (NASDAQ:GEHC) as a robust contender in its industry, with a current market capitalization of $37.87 billion and a price-to-earnings (P/E) ratio that has remained stable over the last twelve months, at approximately 27.27. This stability in valuation metrics is a testament to the company's consistent financial performance, which is also reflected in a solid gross profit margin of 40.52% during the same period.
Looking at the company's stock trends, GE HealthCare has been trading near its 52-week high, with the price hovering at 94.69% of this peak value. This aligns with HSBC's optimistic view and their set price target of $100.00. The InvestingPro Tips further reinforce this sentiment, highlighting GE HealthCare's strong return over the last three months, which stands at an impressive 16.33%, and the analysts' consensus that the company will be profitable this year, building on its profitability over the last twelve months.
For investors seeking more in-depth analysis, InvestingPro provides additional insights, including a total of 5 InvestingPro Tips for GE HealthCare, which delve into the company's market position and future profitability prospects. Interested readers can enhance their investment strategy by accessing these tips on the InvestingPro platform, and by using the coupon code PRONEWS24, they can enjoy an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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