Treasure Chest: The Outlook For Cochlear

This story features COCHLEAR LIMITED. For more info SHARE ANALYSIS: COH

FNArena's Treasure Chest reports on money making ideas from stockbrokers and other experts. Today's idea regards Cochlear.

Whose Idea Is It?

Jarden

The subject:

The outlook for Cochlear ((COH)).

The drum:

This month Jarden initiated a global survey of 54 cochlear implant (CI) specialists from a across the globe, including the US, Europe and India. The broker’s key findings highlight improving momentum for CI patient volumes, especially in key markets such as the US, and Cochlear’s ongoing product dominance.

Cochlear has rebounded from omicron, Jarden notes, and has the ability to leverage its dominant market position across the recent expansion of its total addressable market.

This stems from the company's CI label expansion for single-sided deafness, and a proposal from the US Centre for Medicare & Medicaid Services to expand the eligibility criteria for CIs.

Jarden believes this should stand Cochlear in good stead for number of years. Add to this the imminent launch of the Nuclear 8 processor, which the broker expects in the second half of 2023, and Jarden retains an Outperform rating on the stock.

Jarden has nevertheless cut its target to $224.74 from $250.36 to account for a higher risk-free rate in valuation.

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Macquarie also conducted a survey, in June, of twelve US audiologists specialising in CIs.

While this broker also noted market share gains for Cochlear over the past six to twelve months, it feels a recovery in market share for competitor Advanced Bionics is likely.

Macquarie’s survey also signalled new patient numbers are still below pre-pandemic levels.

The broker agreed the new processor from Cochlear may provide support, amid expectations this will occur over the next six to twelve months. Macquarie retained a Neutral rating and cut its target to $197 from $215.

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Looking more generally at the Australian healthcare sector earlier this month, Morgan Stanley noted that while healthcare PE multiples had been contracting, they remain above levels seen in 2013 when the Australian ten-year bond rate was last above 4%.

Note that the ten-year had reached above 4% at the time, but has since fallen back to around 3.3% on global recession fears.

Morgan Stanley favours those stocks for which the growth outlook is now better than in 2013, or earnings certainty is high. The broker cut its target for Cochlear to $194 from $208 but retained an Equal-weight rating on the growth outlook.

Six FNArena database brokers (of which Jarden is not one) cover Cochlear. Currently they share three Buy (or equivalent) ratings and three Hold. The consensus target is $241.42, suggesting 4% upside from the current trading price.

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