The Cochlear Limited (ASX: COH) share price has come under pressure recently after the hearing device company issued an earnings downgrade in the wake of the coronavirus outbreak.
Does this present ASX investors with a buying opportunity, or should would-be investors instead hold off for now?
Solid recent financial results
As announced in mid-February, Cochlear reported sales revenue growth of 9% to $777.6 million for the first half of FY20. This was driven by a 14% increase in Cochlear implant revenue and a 9% lift in Services revenue.
Cochlear implant units were up reasonably strongly by 13%. With this, developed markets volumes increased by 7%, while emerging market volumes proved to be the real engine for growth, climbing by over 20%.
With regard to earnings, Cochlear recorded a net profit of $157.7 million which was a very healthy 23% increase over the prior corresponding period.
Prior earnings downgrade over coronavirus concerns
Prior to its 1H20 results announcement, Cochlear downgraded its full-year earnings guidance due to the expected impact from the coronavirus. This comes as hospitals across Greater China, which includes Hong Kong and Taiwan, have been deferring surgeries to limit the risk of infection from the coronavirus.
Cochlear has been increasing its commitment to China for several years now, recognising the country will support the future growth of its emerging markets business. China is a top 5 market for Cochlear and one of the company's fastest-growing markets.
In addition, the downgrade announcement also acknowledged other recent setbacks. In November last year, Cochlear received approval for its Osia 2 system. With this green light, the company previously announced intentions to commence the commercial rollout of Osia 2 in the US in the second half of FY20. However, in its recent market update, Cochlear revealed it is now facing delays to the approval for its Osia 2 System in Europe.
Are Cochlear shares a buy?
Despite the current challenges that Cochlear faces with regards to China in particular, I think right now could be a buying opportunity as long as you're prepared to take a long-term outlook.
Cochlear still has a highly entrenched market position due to its strong brand and market-leading position in an industry with high barriers to entry.
It is possible that the market will see a further market correction, but it's almost possible to work out exactly when that will be. In my opinion, any impact will only be short term and I believe that Cochlear is still strongly positioned for sustained strong over the medium to long term.
As the proportion of the global population over the age of 65 continues to grow, there will be a rising demand for hearing products and solutions over the next few decades.
So, with the Cochlear share price down significantly since mid-February, now could be a good time to purchase shares at a more favourable price.
