Cochlear Limited (ASX:COH) is a world leader in the development of hearing implants. Along with the likes of CSL Limited (ASX:CSL) it is one of the largest blue chip healthcare companies on the ASX. However, its share price was absolutely savaged on Monday, dropping a whopping 19% to $174.51, after it made the extraordinary move of completely withdrawing its FY20 guidance citing the impacts of the coronavirus.
In the announcement, Cochlear stated that the number of hearing implant surgeries was declining significantly in many countries as a result of the global pandemic. And while the company went to great lengths to reassure investors that this was only expected to be a short-term, temporary problem, the impacts from the coronavirus are obviously significant, far-reaching and severe.
That seems like a pretty bleak assessment, but there is some silver lining. After the massive drop in its share price, Cochlear shares are currently trading for $179.52 at the time of writing. This is an enormous fall from the 52-week high of $254.40 it reached just last month and could provide an opportunity for investors to pick up shares at bargain prices.
While the short-term outlook is dour, Cochlear stated it expected business to quickly pick up once hospitals around the world resumed normal operations. In fact, in its announcement to the market it stated that it had already seen a small uptick in surgeries in China. And although there is a great deal of uncertainty around how long it will take to get through the worst of the pandemic, Cochlear is uniquely positioned to survive the coronavirus crisis.
For one, it is a mature, global company with a conservatively geared balance sheet. It’s worth remembering that this is a company that recently posted a first half FY20 profit of $157.7 million on total revenues of $776 million. And although Cochlear also has significant expenses to worry about, there are plenty of levers the company can pull to get it through this global economic slowdown.
It seems like almost every day now we receive more disheartening news about the state of the share market both in Australia and overseas. However, particularly in times like these, it is vitally important to maintain a long-term view of your portfolio. Watching the share prices of your former market darlings plummet is naturally going to be panic inducing, but often the worst thing you can do is sell into a falling market and crystallise your losses.
So if you are already a shareholder in Cochlear, consider this an opportunity to pick up more shares and reduce your average buy-in price. That way, when things pick up – and they will, take heart from what Cochlear said is already happening in China – you will experience an even greater recovery in your portfolio.
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Rhys Brock owns shares of Cochlear Ltd. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Cochlear Ltd. and CSL Ltd. The Motley Fool Australia has recommended Cochlear Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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