Healthcare stocks haven't gotten a lot of love from investors in recent years. While the market has been strong and the S&P 500 has rallied by 84% in the past five years, the Health Care Select Sector SPDR ETF has risen by less than half that rate, at just 36%.
That means that many healthcare stocks could be vastly undervalued heading into 2026. As investors start to worry about high valuations in tech and the overall stock market, they may turn to more modestly priced stocks, such as those in the healthcare sector, which offer much more upside.
One healthcare giant that I expect will take off in 2026 is Novo Nordisk (NVO 2.05%).
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Why has Novo Nordisk stock struggled so badly in 2025?
It hasn't been a good year for Novo Nordisk, to say the least. Although healthcare stocks have generally performed well, and the Health Care Select exchange-traded fund is up 12% in 2025, shares of Novo Nordisk have plummeted by 44%. It's been an unusually bad performance by one of the leading healthcare companies in the world.
The company simply hasn't been generating the level of growth that investors have been expecting. It's been fighting to stop compounding pharmacies from selling copies of its popular GLP-1 drugs, including Ozempic, a popular treatment for diabetes that also helps people lose weight.
NYSE: NVO
Key Data Points
That cut into its sales, resulting in management reducing its guidance for the year. It projects between just 8% and 14% growth for the full year (versus 13% to 21% previously). A particularly big blow is that Wegovy, its top weight loss drug, is projected to grow by just 14% this year, down from an earlier forecast of 21%.
Amid these challenges, the company has also made a change at the CEO position, with Maziar Mike Doustdar now leading the business and taking over from Lars Fruergaard Jørgensen. A change in management can rattle a stock, and with all these developments happening at once, it's effectively been a perfect storm that has sent Novo Nordisk's stock into a wild tailspin this year.
A beaten-down valuation could make the stock too cheap to pass up
Shares of Novo Nordisk are down big this year and are now trading at around their four-year lows. Buying the stock today would be almost as if you bought it after the company obtained approval for Wegovy. That approval came in June 2021, when Novo's stock was trading around $42.
The stock is also at historically low levels with respect to earnings, with its price-to-earnings multiple (P/E) at just 14 right now, which is well below its 10-year average.
NVO PE Ratio data by YCharts.
Why a big rally may be overdue for Novo Nordisk in 2026
Whenever there's a flurry of bad news, it can lead to an overreaction, which is what I believe has happened with Novo Nordisk's stock this past year. It may only be a matter of time before it begins to rally again.
The company has been suing compounding pharmacies to stop selling copies of its drugs, and that alone could improve its sales growth next year. Plus, the company is working on developing an oral weight-loss pill, which has been showing promise in late-stage trials.
There are multiple possible catalysts ahead in 2026. Anything that sparks investor interest in the stock next year could lead to a snowball effect, given its current incredibly low valuation.
I believe Novo Nordisk is poised for a significant rally next year. For long-term investors, the growth stock appears to be a no-brainer buy at its current levels.
