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Date: August 09 2012
HEALTHCARE analysts have described Cochlear's full-year result as everything from uninspiring and soft to a ''stalwart performance in adversity'' - but the world's leading bionic ear maker is still trading above their valuations.
Cochlear shares closed lower for the second day running yesterday, as investors digested this week's 68 per cent fall in profit and took a punt on how quickly the company could recover from last September's voluntary recall of its key implant, the CI500.
Cochlear shares fell by 49¢ yesterday, adding to the previous day's fall of $3.40. But at $62.51, they outperform analysts' 12-month price target of $61, according to Bloomberg data.
And they are more than $10 higher than UBS' price target of $52. Its analysts noted this week that Cochlear was no longer promoting its unblemished reliability record in company marketing, and faced greater competition in the first half of 2013.
''To understand the longer-term fallout from the recall, the importance of implant reliability must be understood. As implant design life is greater than 25 years, reliabilty takes on perhaps the most important consideration for patients when selecting a Cochlear implant,'' UBS analysts Andrew Goodsall and Dan Hurren said.
But Wilson HTM analyst Shane Storey, who has a ''buy'' rating on the stock and a target price of $63.05, said Cochlear ''owned'' the marketplace ''by virtue of its long clinical standing and the degree of R&D [research and development] engagement with major implant centres and key opinion makers''.
''Our conviction call on this stock is that any market-share impacts seen in FY12 are reversible,'' Dr Storey told clients. ''We do not see material, irrevocable damage to the 'brand' - and that is what prices this stock.''
Macquarie analysts Craig Collie and Amron D'Silva also have a $63 price target on Cochlear, praising it for limiting market-share loss during the recall to 5 percentage points. Cochlear has between 65 and 70 per cent of the global market.
Rival broker RBS Morgans agreed that ''grave market-share loss and reputational damage from the … recall is unlikely''. But it trimmed its target price to $59.97, from $60.58, saying the shares were fully valued.
According to JPMorgan analysts Steven Wheen and Anasuya Ramesh, Cochlear released an ''uninspiring result that signalled a slowing of growth in every jurisdiction''.
The bank has cut its forecasts for the next three financial years and dropped its recommendation to ''underweight''.
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