Morgan Stanley Downgrades Smith & Nephew, Upgrades Coloplast in MedTech Sector Review

Morgan Stanley analysts revised ratings and price targets across the European medical technology sector on Wednesday, downgrading Smith & Nephew while upgrading Coloplast. The bank maintained its overall "In-Line" industry view, signaling a neutral stance, but identified Amplifon and ConvaTec as the "clearest positive stories" in its coverage.

Key Rating Changes

In a note to clients, the investment bank made several key adjustments to its stock ratings and price targets:

• Smith & Nephew (SN): Downgraded to Equal-weight from Overweight. The price target was reduced to 1,158 pence from 1,304 pence.
• Coloplast (COLOb): Upgraded to Equal Weight from Underweight. The price target was increased to 454 Danish crowns from 370 Danish crowns.
• Carl Zeiss Meditec (AFXG): Initiated with an Underweight rating and a price target of 25.88 euros. Analysts warned the company "faces another earnings reset," citing profitability programs that are "too back-end-loaded" and continued weakness in China.

Morgan Stanley also raised its price targets for ConvaTec to 289 pence, Demant to 388 Danish crowns, and Sonova to 245 Swiss francs.

Subsector Views and Top Picks

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The hearing aid subsector remains Morgan Stanley's preferred area within MedTech, with analysts forecasting a return to approximately 5% market-value growth over the next 12 to 18 months. Within this space, the bank stated a preference for Demant over Sonova, citing "greater near-term earnings upside." Amplifon was also highlighted for having the greatest operating leverage to a recovery in unit demand.

Analysts see a clear path for ConvaTec, noting that its "one-year Infusion Care visibility" de-risks its earnings outlook. They expect double-digit growth in that division and noted that strong cash conversion could support buybacks equivalent to about 10% of its market capitalization over the next three years.

Outlook for Restructuring Stories

Both Coloplast and Smith & Nephew were described as "clearing-event neutrals," meaning the bank is cautious ahead of significant upcoming corporate announcements. Analysts stated, "We would rather own the clearing events than the respective run-ups."

For Coloplast, the market is awaiting a strategy update from the new chief executive on November 3, which is expected to prioritize growth over margins. For Smith & Nephew, analysts believe the company may need a "medium-term rebase" at its fiscal 2026 results presentation in February 2027.