Big Health Care Stocks to Watch in the New Year

Heading into the New Year, many folks might be looking to add some new stocks to their portfolio. Of course, healthcare stocks are always worth considering, as the industry is always a buzz, and these three stocks are certainly ones to watch as 2023 begins.

Slow and Steady is the Name of the Game for UnitedHealth Group 

At a current price just north of $530 per share, UnitedHealth Group (NYSE: UNH) is not a cheap stock, but they are reliable (and fitting of its moderate Buy rating). Its growth may not appear to be much, but with such a sizable share price, do not let what seems to be small numbers fool you. The stock shows consistent growth; its current value is effectively up +7.25% over the last year. And not only is the current share price in the top 25% of its 52-week range, but it is also up +5.81% YTD.

UNH ended the year with an impressive P/E ratio of 26.02 and a decent dividend yield of 1.24%. It does not stop there, though, as analysts have given the stock a price target of $599.56, representing a humble upside of 12.8%. On top of that, analysts also project 12.90% earnings growth, which amounts to quite a lot with a stock of this size.

That said, UNH has not always had it so easy. The stock sank below $200 for the first time since March 2020 (when share value tanked by nearly 35%) but bounced back quickly, making up the loss in roughly the next four weeks of trading. It has been on quite a tear ever since.

Accordingly, UNH is now continuously posting new record highs, but it is back down a little from its most recent high. If anything, though, this is simply an example of UNH's resilience.

Merck & Co Could Be Near a Peak

Having already burst through the top of its 52-week range, Merck & Co (NYSE: MRK) appears to be in a great position to start the new year, and its Moderate Buy rating certainly helps to support that. However, as a moderate buy, a few aspects of this stock may be worth taking a second look at.

For one, while short interest is healthy, analysts have given the stock a price target of $110.47. However, MRK's current share price is $112.32, representing a downside of -1.5%, so they anticipate slipping a little in earnings. Indeed, analysts expect projected earnings growth of -0.54%. Still, an impressive dividend yield of 2.61%, paired with an 18.70 P/E ratio, could suggest the downturn is temporary.

While the stock had a rocky time getting through the last quarter of 2021 and starting 2022, MRK has also been on a tear; theirs began in the fall of this year. Moreover, through Q3 2022, revenue at Merck was up +13.7% since September, one year ago. With that in mind, many analysts have long believed Merck could be undervalued; and its present trajectory may undoubtedly be an indicator.

Pfizer Inc. Is Down But Poised for A Rebound

Pfizer Inc (NYSE: PFE) stock may be more affordable than many others, at a current price of $51.35, but that doesn't mean it can't compete in the current trading climate. While the analysts have given the stock a HOLD rating, for now, this is easily one of the most recognized names in the healthcare world, and they are also a consistent favorite among traders.

After all, the stock's value is in the top half of its 52-week range and is paying a remarkable 3.09% dividend. Its 9.88 P/E ratio is dependable, even as the stock is down -12.23% YTD. But don't let that deter you; the stock is bouncing back from its recent low and is now up +17.56% over the last quarter, and still rising, and it is paying a dividend of 3.09%.

And its next price target of $56.57 represents a notable 10.4% upside. The only thing that is probably hindering the stock from a better rating is poor earnings growth or projected losses. Indeed, analysts expect negative earnings growth of nearly -27%.

Indeed, Pfizer may not be at its highest value for the year as 2022 comes to a close, but it is currently up from its recent low in October. The stock had been falling for a few months, mainly due to legal issues involving the OTC heartburn medication Zantac. Pfizer is one of many drugmakers who manufacture Zantac, but Roche Laboratories, Inc (OTCMKTS: RHHBY) and GlaxoSmithKline plc (NYSE: GSK) are the global leaders.

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The Top Three Stocks Analysts Say To Buy 

The outlook for 2023 is very cloudy, as seen in the S&P 500 price action. The outlook for all stocks is not the same, however, and the analysts are rewarding those with proven performance and the ability to grow margins in the face of rising inflation.

Today's list includes Biogen (NASDAQ: BIIB), Nike (NYSE: NKE) and Netflix (NASDAQ: NFLX) because they meet those criteria, and the analysts are noticing. In addition, these stocks are the most upgrade names from the calendar Q4/FQ3 earnings season and appear well-positioned to deliver gains for investors in 2023. 

Netflix's Darkest Days Are Over 

The chatter from Netflix's latest earnings report and the analyst's commentary is that the darkest days are over. Those dark days were plagued by subscriber losses and weaker-than-expected subscriber figures that led to a 75% implosion in share prices. The takeaway is that Q3 figures not only came in better than expected but show a return to growth that should be sustained in the New Year. Not only is the company working against easy comps, but efforts to limit password-sharing and the new ad-supported pay tiers should help drive strength. 

Regarding the analysts, the analyst's sentiment in Netflix has fallen YOY, as has the price target, but the mood is firming. The post-release activity includes 24 price target increases and a half dozen upgrades. As it is now, the price target is up versus 3 months and one month ago, and it is likely to trend higher given the outlook. The current consensus is near $320, which implies about a 13% of upside. The only downside is that consensus is still below a key resistance point at the $350 level. However, this resistance may be negated by the Q4 results, which are due mid-January 2023. 

Nike Is Ready To Fly Higher 

Nike shares look ready to fly higher after it reported top and bottom line strength despite the need to discount and promote sales. The company didn't give any guidance but revealed some inventory improvement, which the market needed to see. The outlook is at least favorable, given the underlying trends in business. Sales are underpinned by wholesale and DTC, with Nike Direct doing a lot of the heavy lifting. 

Two dozen of the 31 analysts with current ratings issued commentary in the wake of the report. They all include a boosted or set target, and the takeaway is bullish. The sentiment is steady at Moderate Buy as it has been all year but the price target, which is down YOY, is up in the three and 1-month comparisons. This marks a bottom for the sentiment, if not the stock, and the charts also show a bottom. The next hurdle for Nike is $119, which is the Neckline of its reversal pattern. However, it could quickly move up to and above the consensus $126 range if it can get above.

Biogen Is The Most Upgraded Stock In Q4 2022 

Biogen is the most upgraded stock in Q4. The company edges out both Nike and Netflix with 25 total to-date upgrades and price target increases that have the consensus price moving higher. The current consensus implies a 12% upside versus recent price action, trending higher on better-than-expected results and improved guidance. 

The chart here is interesting because it suggests a very strong range for the stock and upward movement within that range. The recent release of Phase 3 results moved the stock after a decline, and now it is in the middle of the range. The boundaries are marked by two sharp movements, one at the beginning of the decline and one at the end, so it is unlikely we'll see the stock move out of it unless there is some significant change in the news. In the near to short-term, investors might expect this stock to move up toward the top of the range near $375, assuming next year's results continue to impress. 

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Can Dick’s Sporting Goods Stock Score Another Win In Q4?

If you are wondering if Dick's Sporting Goods (NYSE: DKS) can score another win in Q4, the odds are high that it will. The company has been exhibiting strength on a sequential and YOY basis driven by product shifts, private label offerings and expanding margins that have the guidance edging higher and the analyst following suit. 

The latest report came out in November and detailed the Q3 period, marked by incredible YOY growth, a solid inventory position, and so little debt that it's easy to ignore. The takeaway for investors is that these trends are expected to continue in Q4 and F2023 despite economic headwinds, leading to higher share prices.

Trading at only 10X its earnings, the stock is valued well below other blue chip retailers, which opens the door to significant gains over the long term. 

The Analysts Are Driving Dick's Sporting Goods Higher

The analyst's activity in Dick's Sporting Goods has been nothing but bullish all year. The consensus of 19 analysts has the stock pegged at a Moderate Buy, with the sentiment trending higher. It is worth noting that all 19 analysts tracking this stock have issued a report since March 2022, including three upgrades that all contain a price target increase.

Fourteen of those reports came out in November, and the Q2 report, the latest of which was released in early December from Argus. In their view, Argus analysts see this stock trading at $140, which is 21% above the current price action and 600 bps better than the Marketbeat.com consensus estimate. 

According to Argus, Dick's Sporting Goods' revenue growth and margin expansion are supported by strength in the private label brands, the use of AI and a new line of women's specific products that hit the shelves this year. Argus increased its price target and its outlook for earnings as well, and even these figures may be conservative, given the company's obvious momentum.  

The company next reports earnings in early March. The consensus figures have the company growing revenue by only 2.3% YOY, which is less than half what the retail sector is expected to have grown over the holidays. The earnings of $2.90 is an even lower bar for the company to beat because it expects a sharp YOY contraction.

Margins are expected to come down versus last year but only marginally compared to the high-single-digit contraction implied by the consensus figures. 

Dick's Sporting Goods Institutional Headwind Vanishes

The institutions have been Dick's Sporting Goods sellers all year, including the 4th quarter when their activity spiked. Interestingly, institutional selling spiked to a multi-year high in Q4 but before the Q3 report was released.

Since then, there has been almost zero (0) activity which suggests the selling is over. As it is, the institutions hold about 75% of the stock, making it a closely held issue. So if the institutions decide they need to up their holdings, it will strengthen the tailwind brought on by the analyst. 

Dick's Sporting Goods' dividend isn't all that spectacular regarding yield, but it is a mighty attractive dividend altogether. In addition, the payout ratio is meager at only 17%, which leaves ample room for increases, and the company is increasing the payout annually.

The history shows eight years of consecutive increases and a high 98% 3-year distribution growth rate that may also continue. This means that today's DKS investors can expect their yield-on-invested dollars to advance at a more significant pace than inflation. That's a good thing.

Turning to the chart, shares of DKS have recovered from their institutionally-induced bottom and are ready to confirm a more significant reversal. The price action is testing resistance at the neckline of the Head & Shoulders Reversal, and it could easily break out to a new high. In that scenario, shares of DKS would most likely move up to the $130 to $140 level and are in line with the latest analysts' chatter. 

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