Needham cuts Dentsply Sirona and ZimVie to ‘hold’ on weak dental market outlook

 Needham downgraded Dentsply Sirona and ZimVie to Hold from Buy, citing a lack of near-term catalysts and continued weakness in the dental market.

The firm noted an ongoing debate over whether the dental market’s long-term growth profile has shifted lower post-COVID.

“We no longer believe XRAY and ZIMV can outperform relative to our broader coverage leading us to downgrade both to Hold ratings

While some industry players expect normalized growth of 3-5%, several structural headwinds, including declining market access expansion, stronger pricing power among dental support organizations, and increased penetration of clear aligners, could be limiting future upside.

Recent indicators suggest that consumer sentiment is softening, which could weigh further on the dental market. U.S. consumer sentiment declined in February, and global sentiment in regions like the Euro Area and China remains well below pre-COVID levels, Needham analysts say.

The report also highlighted persistent staffing issues in the provider market and higher interest rates, which could dampen demand for capital equipment purchases typically financed over $20,000.

For Dentsply Sirona, Needham cited continued market share losses in its implants business and weakness in the equipment segment due to pricing pressure from low-cost competitors. The firm also noted that a potential sale of XRAY’s Wellspect unit could be a long-term strategic positive but might leave an earnings gap in the near term.

Similarly, ZimVie is expected to see limited upside in a flat-to-low growth market. Needham sees no clear path for either company to outperform relative to its broader coverage.

https://www.investing.com/news/stock-market-news/needham-cuts-dentsply-sirona-and-zimvie-to-hold-on-weak-dental-market-outlook-3927738