Medical technology stocks remain under pressure, and analysts at Piper Sandler say the sector may not rebound for several quarters - a recovery they expect could coincide with a downturn in the domestic economy. Within that context, the firm is steering investors toward larger-cap names that combine consumer exposure with resilient balance sheets.
The firm highlights three features it views as supportive for select MedTech names right now: exposure to consumer cyclical dynamics, robust free cash flow generation, and low leverage. Piper Sandler's macro team also notes that market sentiment currently favors consumer cyclical and value-oriented names, as well as companies that return cash to shareholders through dividends and sustain strong balance sheet metrics.
Why focus on large caps
Piper Sandler argues that, in the present market environment, investors should place emphasis on large-cap MedTech companies. According to the firm, these firms are more likely to exhibit the desirable combination of ample liquidity, predictable cash generation and dividend potential that the market is rewarding. Several stocks fitting this profile have already delivered strong year-to-date performance, reinforcing the firm's preference for large-cap exposure.
DexCom Inc. (NASDAQ: DXCM)
Piper Sandler assigns an Overweight rating to DexCom with a $75 price target, using a valuation multiple of roughly 6 times enterprise value to fiscal year 2026 estimated sales. That valuation is framed on an assumed net cash position of about $758 million and approximately 391 million fully diluted shares outstanding.
DexCom fits the firm’s large-cap criteria and has been among the stronger performers so far this year. Piper Sandler highlights several risks that could affect the stock, including potential obstacles to regulatory approval, the emergence of competitive products, and pressure on reimbursement. Recent company disclosures cited by the firm include fourth-quarter 2025 revenue of $1.26 billion, which exceeded analyst expectations, and the appointment of Google executive Rick Osterloh to DexCom’s board of directors.
STERIS plc (NYSE: STE)
The firm also retains an Overweight rating on STERIS with a $300 price target, based on approximately 25 times next-twelve-months-plus-one earnings per share of $11.98. STERIS meets Piper Sandler’s large-cap preference and is noted for favorable balance sheet metrics and strong free cash flow generation.
Piper Sandler identifies several company-specific vulnerabilities for STERIS, including sensitivity to procedure volumes, exposure to supply chain and inflationary pressures, and the potential for lumpiness in capital equipment purchasing patterns. The firm references STERIS’s fiscal third-quarter 2026 update, where the company recorded a top-line beat of roughly 1% while bottom-line results were in line with consensus. The company also declared a quarterly dividend of $0.63 per share.
Bottom line
Both DexCom and STERIS embody the characteristics Piper Sandler views as advantageous in the current market - namely large market capitalizations, strong free cash flow generation and conservative leverage profiles - making them the firm’s preferred holdings within its MedTech coverage while the sector navigates ongoing headwinds. The firm underscores, however, that a full sector turnaround could be several quarters away and may be linked to broader domestic economic conditions.