The healthcare sector on the Australian Securities Exchange (ASX) has been in a state of turmoil this year, with the S&P/ASX 200 Health Care Index (ASX: XHJ) trailing far behind the broader index. The sector's struggles can be attributed to macroeconomic pressures, rising inflation, and regulatory uncertainties. However, amidst the gloom, there are a few beaten-down healthcare stocks that analysts predict could rebound significantly over the next 12 months, with some carrying potential upside of up to 202%.
In my opinion, the current market conditions present an opportunity to identify undervalued stocks with strong fundamentals. Let's take a closer look at three ASX healthcare shares that have been under pressure but could be poised for a significant turnaround.
ResMed Inc (ASX: RMD)
ResMed, a global leader in sleep health, has seen its shares fall by around 27% year to date and 32% lower than a year ago. The company's latest third-quarter earnings update didn't help, as the results came in softer than expected, causing investor sentiment to tumble. However, I believe that the ASX healthcare stock is now oversold and trading far below fair value.
Sleep disorders require long-term management, and as a global leader, ResMed has a powerful position in the large and growing market. According to Market Index data, the majority of brokers have a strong buy rating on ResMed shares and tip a huge 202% upside to an average target price of $80.09 at the time of writing. In my view, this suggests that the market is underestimating the company's long-term growth prospects.
Pro Medicus Ltd (ASX: PME)
Pro Medicus shares have climbed higher in Thursday morning trade, up around 1% and changing hands at $170.72 a piece. For the year to date, however, the ASX healthcare shares are still down around 23% and around 38% lower than 12 months ago. The company's share price turned a corner in early June when it announced three new contract wins, including a new seven-year $16 million contract with TidalHealth, a five-year $28 million contract renewal with Allegheny Health Network (AHN), and a five-year $16 million contract renewal with OSU.
The Pro Medicus share price has rebounded by over 29% since the 1st of June. The company's US subsidiary also won two $40 million five-year contract renewals back in early March. In my perspective, these contract wins demonstrate the company's strong position in the market and its ability to secure long-term deals. Market Index data shows that the majority of brokers rate the ASX healthcare shares as a strong buy and tip around a 13% upside to an average target price of $192.92 at the time of writing.
Cochlear Ltd (ASX: COH)
Cochlear shares are climbing higher on Thursday. At the time of writing, the ASX healthcare company's shares are up around 1% and changing hands at $112.30 a piece. But it's been a difficult year for the medical hearing implant device company. Its shares are still down around 57% year to date and 60% lower than this time last year. Cochlear has also endured a sector-wide rotation away from ASX healthcare shares this year, with its share price crashing on two separate occasions in 2026.
However, I think the sell-off has been overdone. Cochlear is still a strong, globally dominant business, and its long-term outlook is intact. Market Index data suggests brokers are reserved about the stock. The majority rate Cochlear shares as a hold. But the $143.14 average target price still implies a potential 27% upside at the time of writing. In my opinion, this suggests that the market is underestimating the company's resilience and long-term growth prospects.
In conclusion, while the ASX healthcare sector has been under immense pressure this year, there are a few beaten-down stocks that analysts predict could rebound significantly over the next 12 months. In my view, these stocks present an opportunity to identify undervalued companies with strong fundamentals and long-term growth prospects. However, it's important to note that investing in the stock market always carries risks, and it's essential to conduct thorough research and due diligence before making any investment decisions.
