Barclays analyst Christopher Pasquale initiated coverage on 26 U.S. medical technology companies on Tuesday, placing Stryker (ASX: SYK) and Abbott Laboratories (ABT) on the large-cap medical technology recommendation list, according to a report.

The firm noted that the medical technology sector's recent underperformance offers investors an opportunity to buy high-quality companies at attractive valuations. Before Pasquale's optimistic view, the industry benchmark iShares U.S. Medical Devices ETF (IHI) had fallen nearly 19% over the past five years, while the S&P 500 rose nearly 77% during the same period.

In his report, Pasquale wrote: "After several years of relative underperformance due to slowing revenue growth, medical technology stocks are now trading at their lowest valuations in a decade, and their discount relative to the S&P 500 has reached the widest level since the peak of the technology bubble."

He described the selloff as an overreaction, partly driven by multiple company-specific headwinds over the past year, "which made the industry's growth rate mean reversion look like a more severe deterioration in fundamentals."

Pasquale expects that potential stabilization in large-cap medical technology companies' revenue next year could serve as a catalyst to boost market sentiment and lift valuation multiples. "While we believe investors should remain cautious until the outlook becomes clearer, we are confident that the current market environment presents attractive investment opportunities," he added.

Which stocks are worth buying? Stryker and Edwards Lifesciences lead the overweight list

Barclays named Stryker (SYK) and Edwards Lifesciences (EW) as its top large-cap picks, with price targets of $375 and $110, respectively.

Other large-cap stocks rated "Overweight" include Abbott Laboratories (ABT), with a price target of $120; GE HealthCare Technologies (GEHC), with a price target of $85; and Intuitive Surgical (ISRG), with a price target of $485.

For small- and mid-cap stocks, Barclays named Beta Bionics (BBNX), Dexcom (DXCM), and LivaNova (LIVN) as its top picks, with price targets of $30, $115, and $105, respectively.

Other small- and mid-cap medical technology stocks rated "Overweight" include Axogen (AXGN), with a price target of $55; Bausch + Lomb (BLCO), with a price target of $24; Procept BioRobotics (PRCT), with a price target of $30; and TransMedics (TMDX), with a price target of $120.

Which stocks require caution? Medtronic and Boston Scientific rated "Neutral," Baxter and Becton Dickinson hit with "Underweight"

Companies rated "Neutral" include: Alcon (ALC), with a price target of $70; Avanos Medical (AVR), with a price target of $10; Boston Scientific (BSX), with a price target of $48; Humacyte (HUMA), with a price target of $0.50; Insulet (PODD), with a price target of $150; Medtronic (MDT), with a price target of $95; Minimed (MMED), with a price target of $22; Senseonics (SENS), with a price target of $10; Tandem Diabetes (TNDM), with a price target of $18; Cooper Companies (COO), with a price target of $60; and Zimmer Biomet (ZBH), with a price target of $100.

Companies rated "Underweight" include: Baxter International (BAX), with a price target of $20; Becton Dickinson (BDX), with a price target of $165; and Inspire Medical (INSP), with a price target of $65.