After gyrating downwards over the last 6–8 months, the Cochlear Limited (ASX: COH) share price finally bottomed at 52-week lows of $182.06 in late January.
It has since pushed hard off that level – although at a far smaller trajectory than its 52-week highs of $256.09 in August last year.
Losing approximately $74 per share is a hard pill to swallow in any length of time, let alone within the course of a financial year.
Alas, analyst views are mixed on Cochlear's direction at the moment. Still, there's been a flurry of remodelling and valuation changes in the last few weeks in response to the changing healthcare landscape (not to mention Omicron as well).
Can Cochlear live up to these expectations? Let's take a closer look.
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Sentiment is a mixed salad for Cochlear
There are firms recommending to buy, hold and sell the company's shares, however, the weighting appears to be biased towards a hold.
Out of the 19 analysts covering Cochlear in a list provided by Bloomberg Intelligence, one third have it as a buy, over 44% have it as a hold whereas the remaining 22.2% urge their clients to sell or short Cochlear shares now.
Amongst this list, the consensus price target is $223.74 per share, indicating the overall sentiment appears to be bullish when factoring the 'wisdom of the crowd'.
Credit Suisse recently upgraded its rating on Cochlear to a buy, assigning a $235 per share price target in doing so. Given the recent pullback in share price, this could be an entry signal and also makes the valuation more attractive.
Fellow broker Citi agrees. It also upgraded Cochlear to a buy today and values the company at a premium of $220 per share.
Meanwhile, each of Jefferies, Macquarie and Morgan Stanley see the opposite side of the coin. All three firms aren't so rosy on the outlook for the hearing aid giant for 2022 and beyond.
Jefferies and Macquarie are both neutral, although both also reduced their valuations on Cochlear in January as well.
Whereas analysts at Jeffereis value Cochear at $206.40 per share after a 6% haircut, the team at Macquarie are more constructive and see it valued at $222.50 per share (even after a 13% decrease).
Both downgraded the Cochlear share price to neutral in the last few weeks, in contrast to the two upgrades discussed earlier. JP Morgan is also neutral on the company with a $227 price target.
Morgan Stanley is bearish however, and urges its clients to sell Cochlear shares after valuing the company at $180 per share in January.
The broker notes issues on valuation in its recommendation to sell – a rating it shares alongside Goldman Sachs. Analysts at Goldman see Cochlear valued at $197 per share in a note from last year as well.
Nevertheless, factoring in the scope of analysts covering the company, then the sentiment is clearly bullish on Cochlear shares.
Which way will the Cochlear share price go?
Of course, making predictions in the stocks market is a fool's game, although, perhaps not The Motley Fool's one. So far in 2022, shares are down 9%, outpacing losses in the wider market.
Yet, most of the bearish commentary is centred around valuation, and not necessarily the company's Fundamentals. Even the neutral ratings value the company at a substantial premium to where it is trading at today.
JP Morgan even notes the same point explicitly in a recent note, saying that "valuation remains our only real concern with Cochlear, so we retain our Neutral rating, given the lack of upside to our DCF-based price target".
Cochlear's products also sit on the podium as the premier offering in hearing implants, non-negotiable, says JP Morgan.
"In our view, Cochlear can comfortably claim to offer the most reliable implants, based on many years of data. This matters, as the importance of reliability has likely risen in the minds of both clinicians and recipients after two competitors have announced major recalls (corrective field actions) in the last two years" the broker said in a recent note.
However, revenue growth has 'faltered' for Cochlear recently, according to Redpoint Investment Management chief Max Cappetta, when speaking to The Motley Fool's Tony Yoo last year.
Cappetta noted that implant sales stagnated during COVID-19 as well, and also believes future growth prospects are already fully priced into the stock.
Hence, it appears that factors of valuation and concerns around the COVID-19 trajectory are weighing the growth outlook for Cochlear shares coming into the near future.
As to which way it will go – if the bulls have it, Cochlear might push towards the consensus price target of approximately $224 per share, but the bearish market pundits reckon it could sink to $180–$197 per share.
In the last 12 months, the Cochlear share price has slipped 6% into the red and is down 9% this year to date. In the past week, shares have regained some steam and are now 2% in the green.
